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DUKE UNIVERSITY LIBRARY 
DURHAM, N. C. 


So L 
ASH F 
CONTENTS 
No. Page 


226. RAw MATERIALS AND THEIR EFFECT UPON 
INTERNATIONAL RELATIONS 
Preface .. 5 
Theory and Praceice! bi Newaonal Self- Suffi- 
ciency in Raw Materials, by George Otis 
Smith : i 
Economic Retinans Return Raw Mater ile 
Prices and Standards of Living: Their 
International Effect, by L.L.Summers . 14 
Economic and Political Effects of Govern- 
mental Interference with the Free Inter- 
national Movement of Raw Materials, by 


“I 


Be yeanal) crandera 207): 25 
Raw Materials and ienpesahen by Parker 

if sVioony au 35 
International Financial ieeeecol of Raw 

Materials, by Edward Mead Earle ... 46 
Political Control of Raw Materials in War 

andbeace by. e)summers 4). ooi 54 
Ea phi carey lnvamey Pan wai ho ei amitte |, .:h eS ats OF 


January, 1927 


227. CHINESE POLITICS AND FOREIGN POWERS, by 
Harold S. Quigley 


Preface 49>". Sie UE eee 7 
Chinese Politics and F orien Powers Sree) vOO 

JQ ToT a eS ea Se a Nae ag 
Scrape ee ee i) a ees ey ea hg BO 
Greatbritaiiemeene. | Ch Re Ba 
ibheyUnitedistates, 272 eae ale > ee 85 
Cin ClUSIONM ME eens SLM: Cade bse ke 8S 
Recent Events 
Constitutional and Political . .... 8§& 
Diplomatic 


120380 


Syllabus on Recent Chinese Politics and 
Diplomacy 
Extraterritoriality and Chinese Law 
Political and Constitutional Develop- 


ment 


Economic Conditions: antl Problems : 
International Relations of China 
References for the General Reader : 
Chart Showing the Development of Chi- 
nese Culture . .. . following page 
February, 1927 


228. THE BRITISH COMMONWEALTH OF NATIONS 


Preface 
Report of ee Imperial Relations Cine 


mittee 

Introduction 

Status of Great Baie aut the Donors 

Special Position of India . J 

Relations between the Various Pacta * 
the British Empire 


onooP 


The Title of His Majesty the King 

Position of Governors-General 

Operation of Dominion Legislation 

Merchant Shipping Legislation 

Appeals to the Judicial Committee 
of the Privy Council . 


Relations with Foreign Countries 


a. 
b. 


Cc 
d. 


Procedure in Relation to Trades 

Representation at International Con- 
ferences y 

General Conduct of Foreign ‘Policy 

Issue of Exequaturs to Foreign Con- 

suls in the Dominions 

Channel of Communication beeen 
Dominion Governments and For- 
eign Governments . 


Page 


109 


II! 
IIil 
II2 


113 
114 
115 
117 
118 
119 
120 


123 
125 


126 


126 


bo 


Page 


System of Communication and Consulta- 


tion . . 127 
Particular Aspects a Foreign Relations 

Discussed by Committee .. . 128 
a. Compulsory Arbitration in inter. 

national Disputes .. . 128 


b. Adherence of the United Grates! 6 
America to the Protocol Estab- 
lishing the Permanent Court of 


International Justice. .... . 128 

c. The Policy of Locarno . . eles 

Appendix: Specimen Form of eae LA IANO) 
The Empire as It Is, Editorial in the London 

Times, November 22, 1926 . . 131 
Address by the Rt. Hon. attach a Melbanene 

Been i): 4 ves 


March, 1927 


LOCARNO AND THE BALKANS 


Preface. . 147 
A Turning Poin in Sige st ames os 
Shotwell i.e 149 
The Possibility of a Bales ioeaeng, by 
David Mitrany . . . ; : 162 
History of the Rederative Nig Rupes aeaauapies:#): ie(Gre} 
eBallvanieocarmomnen iil Jn ea nO 
iO MOsrAaphV vant oe Mini Cae LAN DPN Pay ze 


April, 1927 


THe INTERALLIED DEBTS 
Statement by Members of the Faculty of 
Political Science, Columbia University, 
on the War Debt Problem 
Prefatory Statement, by Nicholas ak 
Butler. j.2 Ak sue eae Ny h13 taf) 
Were os Statement yilabh tase ON ei eee TAO 


Page 


The Interallied Debts and American Policy, 
by James W. Angell . .'. -Souuueeme 
The Interallied Debts, by Fi W. Taussig 
The Economic Value of the Mandated Terri- 
tories in Relation to Interallied Debts, 
by Edward Mead Earle 22) 32 

Letter of Frederick W. a to the 
President , 

Secretary of the Treasney) Mellon’ s | Reply to 
Frederick W. Peabody’s Letter to the 
President 

Endorsement, by Members of the Faculty of 
Princeton University, of the Statement 
by the Faculty of Political Science, Col- 
umbia University 
Prefatory Statement, by Jahe Grier 

Hibben.) .:..): (). eee eee |S. 
Text of Statement 

Secretary of the Tease Mellon’s Letter 
to John Grier Hibben .. . 

Statement, by John Grier Hibbess in 1 Reply 
to Secretary of the Treasury Mellon’s 
Letter . . 

Reply, by Edwin R. A. Seligman, b Secre- 
tary of the Treasury Mellon’s Letter 

Facts about the Debts ; 

The Present Standing of the Debts 

Bibliography . E : 

May, 1927 


THE LEAGUE OF NATIONS 


Preface 
The League of Nations : as an . Histosieat Fact, 
by William E. Rappard <7) 23a 
The League of Nations as It Was Meant 
to Be 0 ean 


188 
203 


215 


227 


244 


No. Page 


The League of Nations as It Actually Is 289 

The League as It Seems Likely to Develop 298 
The Admission of Germany to the League of 

Nations and Its Probable Significance, by 

Caleb Perry Patterson 

Germany’s Admission to the League of 


Nations . . 303 

The Probable Siatinesace ‘ae Germany's 
Admission to the League of Nations. . 316 
Biblioguaphiya es Teper awe sell Wolie ai Lot oes 

June, 1927 
232. THE PERMANENT CouRT OF INTERNATIONAL 
JUSTICE 

Preface 1...) 327 


The United States die the Peemenmeet Gunn 
of International Justice, by Quincy Wright 329 

Resolution of United States Senate Advis- 

ing and Consenting to Adherence of the 

United States to the Permanent Court of 
International Justice, January 27, 1926 360 

Sidelights on the Permanent Court of Inter- 
national Justice, by Ake Hammarskjold 363 
FNEHERETIGES eee huey edn Ts, RE i eo) Vn, EOS 

September, 1927 


233. THE GENESIS OF THE UNIVERSAL POSTAL 


UNION 
Preface -. : J. 393 
The Genesis of the Uanyercal Postal gion 
Dy oli Geesliypicitas cele yal isan ear okps say eat ZO 
Rules for the Conferences ...... . 404 
OsioinalGeroyeck, wer. tote pie at aa 406 
Notes and References . . 423 


Summary of the Work of the miversal 
Postal Union Since 1874 


No. Page 


Congresses and Conferences ..... . 437 
International Burean |... , Gees 
October, 1927 


234. ITALY’s FINANCIAL POLicy 


Pretaceimr sa. pire 447 
Italy’s Fi jnanctal ‘Policy! as " Outlined by 
Count Volpi of Misurata ..... . 449 
The Settlement of the War Debts = fs Ae DEED 
The National Budget . . | (eee 
Unification of Note Issues ....... 452 
The Control of Expenditure . . 453 
Industrial Securities and the Stack Ex- 
changes .. . «oes eS 
Funding of the Floating Debt oy eevee A 
Logical Developments . . 458 
Financial Statement, by Chum ‘Volpi Mal 
Misurata . . 460 


The Need for Industrial Concentration 465 
The Trade Balance and the Balance of 


Payments... .. . <-) 1) 2]. 3azeenreeses 
Export Credits... . . 1) 23 eeeeeneres 
Foreign Loans .. . 469 
Budget Receipts and Expenditures before 

and since the War .. . 473 
Three Budgets: 1925-26, 1926-27, 1927- 

28) : MEME rime 0! 
The Financial Vou! 1925~26. The Use 

Made of the Surplus. . - 2 ]eeeeeees 
The Financial Year 1926-27 . . . |. | . 478 
Financial Year'1927-28 . . | eee 
Local Government Bodies ....... 485 
Cassa Depositie Prestiti ...... . 489 
Taxation Policy .. . . SR ae erA OF 
Compensation of War Lasees oo AOE 


The Cassa Ammortamento. ..... . 495 


The Bank of Issue—Banks—The Valuta 
and Exchange Rates 
The Instituto di Liquidazione 
The National Debt f 
Text of the Italian Labor Charter. 
The Corporative State and Its Organization 
Bibliography 
November, 1927 


235. AUSTRALIAN IMMIGRATION POLICY 
Preface 
Australian Tuned eranion Policy, by. A. ‘i. 
Charteris 
Introductory . 
Negative Bere cade Beelocint 
Historical 
Chinese iettae 1852-62 
Restrictive Measures 
Anti-Chinese Measures 1882- 97. 5 
The Dictation Test Say 
Immigration Act, 1901 ‘ 
Exemption lon Gentences Agree 
ments” : 
Immigration (menciaent) oe 1925 
Numerical Limitation on Admission of 
Certain Aliens 
Political and Social 
Premier Griffith’s eeeenent 1885 . 
Modern Grounds of Approval : 
Positive Aspect—Promotion of White 
Settlement 
Cooperation with Imperial Cavcuacnt 
Assisted Passages . i : 
Commonwealth Legislation, 1926 F 
Development and Migration Act : 
Northern Territory (lene cen 
Act, 1926 Wis 


No. Page 
Appendices 
Appendix A ME 
Method of Applying Dictation Test . 543 
Judicial Interpretation of ‘ Immigra- 


tion’’ and “Immigrant” 39) ee 544 

Appendix B ... . 3 ee 545 
Legal Disabilities of British Indians 

Domiciled in Australia ..... 545 


December, 1927 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
Director, NicHoLAS Murray BUTLER 


Assistant to the Director, HENRY S. HASKELL 

Division Assistant, AMY HEMINWAY JONES 
Office, 405 West 117th Street, New York City 
Telephone, Cathedral, 4560—Cable, Interpax, New York 


SPECIAL CORRESPONDENTS 


Sir WILLIAM J. CoLuins, M.P., London, England 

JEAN EFREMOFF, Paris, France. (Russia) 

F. W. ForrsSTER, Zurich, Switzerland. (Germany) 
HELLMUT VON GERLACH, Berlin, Germany 

EDOARDO GIRETTI, Bricherasio, Piedmont, Italy 

CHRISTIAN L. LANGE, Geneva, Switzerland 

Davin MitTRANy, London, England. (Southeastern Europe) 
TsuNEjIRO Mryaoxka, Tokyo, Japan 


Centre Européen 


Comité d’Administration 


Pau APPELL, France, Président Henry LICHTENBERGER, France 


Moritz J. Bonn, Germany GILBERT Murray, Great Britain 

GUILLAUME FatTio, Switzerland ALFRED NERINCX, Belgium 

ALFRED G. GARDINER, Great Nicouas S. Poitis, Greece 
Britain E. VoN PRITTWITZ UND GAFFRON, 

ANDRE HONNORAT, France Germany 

GEORGES LECHARTIER, France JosEPH REDLIcH, Austria 


Count Caro Srorza, Italy 


Directeur-Adjoint, EARLE B. BABCOCK 
Secrétaire Générale, MLLE. M. TH. PEYLADE 
Auditeur, TH. RUYSSEN 
Bureau, 173 Boulevard St.-Germain, Paris, France 
Téléphone, Fleurus 53.77—A dresse Télégraphique, Interpax, Paris 


INTERNATIONAL CoNCILIATION 


Published monthly, except July and August, by the 
Carnegie Endowment for International Peace 


Entered as second-class matter September 15, 1924, at the post office at 
Worcester, Massachusetts, under the Act of March 3, 1879. 


RAW MATERIALS AND THEIR EFFECT 
UPON INTERNATIONAL RELATIONS 


ARTICLES 
BY 
GEORGE OTis SmiTH, L. L. SUMMERS, . 
E. Dana DuRAND, PARKER T. Moon, 
Epwarp MEAD EARLE 


JANUARY, 1927 
No. 226 


CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 
DIVISION OF INTERCOURSE AND EDUCATION 
PUBLICATION OFFICE: 44 PORTLAND STREET, WORCESTER, MASS. 
EDITORIAL OFFICE: 405 WEST II7TH STREET, NEW YORK CITY 


Subscription price: 25 cents for one year, one dollar for five years 
Single copies 5 cents 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


ROBERT S. BROOKINGS 


Trustees 


NicHoLaAs Murray BUTLER 


Joun W. Davis 
FREDERIC A. DELANO 
Lawton B. Evans 
Austen G. Fox 
RoBErT A. FRANKS 
CHARLES S. HAMLIN 
Howarpb HEINZ 
Davip JAYNE HILL 
ALFRED HOLMAN 
WiLLiAM M. Howarp 
ROBERT LANSING 


Officers 


FRANK O. LowDEN 
ANDREW J. MonTAGUE 
Dwicut W. Morrow 
RosBert E. OLps 
Epwin B. PARKER 
LeRoy PERcy 
WitiiaM A. PETERS 
Henry S. PRITCHETT 
Eximsu Root 

JAMEs Brown Scott 
James R. SHEFFIELD 
Maurice S. SHERMAN 
James T. SHOTWELL 


Sitas H. StRAWN 


President, NICHOLAS MURRAY BUTLER 
Vice-President, ROBERT LANSING 
Secretary, JAMES BROWN ScoTT 

Assistant Secretary, GEORGE A, FINCH 
Treasurer, ANDREW J. MONTAGUE 
Assistant Treasurer, FREDERIC A. DELANO 


Executive Committee 


NicHoLtaAs Murray Butler, Chairman 
James Brown Scott, Secretary 


AUSTEN G. Fox 


ANDREW J. MONTAGUE 


Henry S. PRITCHETT 
E.Lisu Root 


JAMES R. SHEFFIELD 


Division of Intercourse and Education 


Director, NICHOLAS MuRRAY BUTLER 


Division of International Law 


Director, JAMES BROWN ScoTT 


Division of Economics and History 


Director, JAMES T. SHOTWELL 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
Director, NicHoLAs MurrAy BUTLER 


Assistant to the Director, HENRY S. HASKELL 

Division Assistant, AMY HEMINWAY JONES 
Office, 405 West 117th Street, New York City 
Telephone, Cathedral, 4560—Cable, Interpax, New York 


SPECIAL CORRESPONDENTS 


Sir WILLIAM J. CoLiins, M.P., London, England 

JEAN EFREMOFF, Paris, France. (Russia) 

F. W. FoEersTER, Zurich, Switzerland. (Germany) 
HELLMUT VON GERLACH, Berlin, Germany 

EpDOARDO GIRETTI, Bricherasio, Piedmont, Italy 

CHRISTIAN L. LANGE, Geneva, Switzerland 

Davin Mirrany, London, England. (Southeastern Europe) 
TsuNEJIRO MrvaoKA, Tokyo, Japan 


Centre Européen 


Comité d’Administration 


PAuL APPELL, France, Président HENRY LICHTENBERGER, France 


Moritz J. Bonn, Germany GILBERT Murray, Great Britain 

GUILLAUME FartTio, Switzerland ALFRED NERINCX, Belgium 

ALFRED G. GARDINER, Great Nicovas S. Poriris, Greece 
Britain E. von PRITTWITZ UND GAFFRON, 

ANDRE Honnorat, France Germany 

GEORGES LECHARTIER, France JosEePH REDLICcH, Austria 


Count Caro Srorza, Italy 


Directeur-Adjoint, EARLE B. BABCcocK 
Secrétaire Générale, MLLE. M. TH. PEYLADE 
Auditeur, TH. RUYSSEN 
Bureau, 173 Boulevard St.-Germain, Paris, France 
Téléphone, Fleurus 53.77—A dresse Télégraphique, Interpax, Paris 


CONTENTS 


Page 

Preface! (i. 030. SE 2 5 
Theory and Practice ap National ‘Sel: ‘Suificeneen in Raw Mate- 

rials, by George Otis Smith. . .. . on a 7 


Economic Relations between Raw Materials, Prices and 
Standards of Living: Their International Effect, by L. L. 
SUMIAMERS 650 ne ol Ho rr 14 

Economic and Political Effects of Governmianeal Interference 
with the Free International Movement of Raw Materials, 


by E: Dana Durand). 20089.) . oo. Je 25 
Raw Materials and Imperialism, by Parker T. Moon .. ... 35 
International Financial Control of Raw Materials, by Edward 

Mead Earle, 20.0. oc. 4 0°)... 46 
Political Control of Raw Matetials 3 in War and Peace, by L. L. 

Summers) ) 5.00.0). 0). WAS PO 54 


Bibliography |. 6003) 6) ache cai jays yeu eh eh Be 61 


PREFACE 


In May, 1926, a Conference on International Problems and Rela- 
tions was held at Briarcliff, New York, under the auspices of the 
Carnegie Endowment for International Peace with the cooperation 
of the Academy of Political Science. In addition to specialists 
and publicists identified with the outstanding problems of inter- 
national affairs, a few distinguished representatives of public opinion 
in foreign countries and a representative group of American editors 
and journalists were the guests of the Conference and took part in 
its program. 

In view of the widespread interest awakened by the manifesto! 
issued on October 19, 1926, by bankers and industrialists of sixteen 
nations appealing for lowered tariff barriers in Europe, it has seemed 
appropriate to reproduce, as a contribution to a better understand- 
ing of the problems now under discussion, a number of the addresses 
on Raw Materials made at the Briarcliff Conference. 

There appears to be wide-spread misunderstanding as to the effect 
of the provisions of the Treaty of Versailles upon the control of certain 
raw materials that enter into several of the leading industries of the 
civilized world. Thesystem of mandates established pursuant to the 
provisions of the Treaty of Versailles opens the mandated territory to 
world trade much more freely than was the case under the system of 
colonial control which formerly prevailed. The adjustment of raw 
material supplies, so far as the people of the United States are con- 
cerned, is improved rather than the contrary, by the terms of the 
Treaty of Versailles. 

This whole subject needs examination with reference not merely to 
the needs of the American people but also to those of the powers which 
exercise mandates. The largesums of money that have been expended 
in the administration of newly acquired territories are far greater than 
any corresponding gains. The colonial trade of Great Britian, for ex- 
ample, has hardly been affected by the relatively small increase of 
territory and the still smaller gains in raw materials. 


NicHoLas Murray BUTLER 
New York, December 11, 1926. 
1See p. 63. 


[5] 


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THEORY AND PRACTICE OF NATIONAL 
SELF-SUFFICIENCY IN RAW MATERIALS! 


GEORGE OTIS SMITH 
Director, United States Geological Survey 


National self-sufficiency is only a relative term. It is a balance 
between variety of demand and adequacy of supply that can never 
be in perfect equilibrium. A new use of this or that material calls 
for a larger supply, and we have to import what we had previously 
been exporting. A substitute is developed, and a deficit that had 
to be met with imports changes almost over night into a surplus. 
Or some industrial trouble may create a temporary scarcity that 
draws foreign material to these shores. Fluctuations in market 
prices commonly mark the ups and downs of this balance, and 
the ebb and flow of international trade exhibit the needed corrective 
to its lack of perfect adjustment. 

Among the continents, North America has been so richly blessed 
with natural resources—climate, soil, forests, water power, and 
minerals—as to suggest that here is a group of Nature-favored 
nations. This condition is best exhibited in the well-recognized 
large degree of self-sufficiency of the United States in raw materials— 
a strategic advantage which is more than an academic theory, for 
we approach material independence in practice. Yet this highly 
advantageous situation has its limits, and there is some danger in 
the psychological self-sufficiency which discounts resource invento- 
ries and discourages national cost-keeping. Indeed, we might de- 
scribe one phase of our national self-sufficiency by saying that 
it is the alibi promptly set up by the American industrialist when- 
ever it is suggested that we need to take thought for the morrow. 
Fear of governmental action of some sort immediately arouses 
vehement assertions that all is well—we have enough of everything, 
and even if we haven’t we will find it. 

If we ask ourselves what degree of national self-sufficiency is 
most desirable, a satisfying answer is not at all easy, since inter- 


1 Reprinted from the Proceedings of the Academy of Political Science, Volume XII, 
Number 1, July, 1926, pp. 116-122. 


Ra 


~ 


8 


national commerce is based on lack of complete national self-suf- 
ficiency, and present-day intercourse between nations as we know 
it rests on this exchange of goods. 

One nation may depend upon foreign supplies preeminently 
for foodstuffs, another may be deficient in fuel, and it is easy to 
see the advantage of exchange of products—for example, between 
England and Denmark. The dependence of a nation upon its 
neighbors or upon more distant countries may even express itself 
in a considerable variety of goods—foodstuffs, fibers, forest products, 
the mineral fuels, the metals, and various mineral raw materials. 

In the following outline of theory and practice of national self- 
sufficiency, I shall refer chiefly to the mineral raw materials, for 
the obvious reason that I have had more contact with mineral 
resources than with other materials, but also because minerals can 
neither be made nor replaced by man’s agency—they cannot be 
found or won unless they already exist, and once they are mined 
there is no renewal of supply. A lack of platinum ore or a worked- 
out phosphate deposit therefore presents a deficit quite different 
from a shortage in wool or wheat. Thus it is that minerals can in 
a special sense place limitations upon a nation’s independence. 

In both theory and practice the measure of a nation’s material 
self-sufficiency changes as and because the times change. No 
demonstration is needed of the fact that the complex civilization 
makes more varied and larger demands for raw materials than the 
simpler society. We have only to compare the self-contained life 
of our colonial fathers and mothers on the frontiers with our present 
urban life, where a single day’s stoppage of transportation begins 
a long chain of shortages in the necessities of life. In early days the 
communities in northern New England were self-sufficient in their 
fuel supply; now a coal strike in Pennsylvania subjects them to 
real hardship. Then a local supply of iron ore and charcoal provided 
the metal they needed, whereas now several distant states contributé 
the ore mixture and the coke that make their steel. Still another 
illustration: A century or more ago, potash from ashes was com- 
monly produced in the newly settled parts of Maine and was one 
of the few exportable products of home industry, being sent down 
to tidewater by canoe or wagon; now German mineral potash by 
the carload is shipped in to the potato fields of what was then 
untouched forest. 


[8] 


9 


It is this ever-changing civilization of ours that makes hard- 
and-fast inventories of reserve supply and definite estimates of 
future demand impossible. Practice in such matters is fairly certain 
to discredit theory, and the way of the estimator is hard. For 
example, take petroleum: When resolved to something approach- 
ing common terms, the estimates of United States petroleum re- - 
serves made in the last twenty years have varied at the most only 
seventy-five per cent, but in the same period the annual rate of 
consumption has increased more than sixfold. Another item of 
uncertainty in estimates may be illustrated by copper: In 1900 
the outlook for ore reserves was based on a requirement of five 
per cent metal content, but ten years later engineering advances 
brought into our reserves ore carrying only two per cent. 

In making inventories of present and future reserves, facts of 
geographic distribution and of distance between centers of supply 
and demand are of prime importance. Mr. Schwab once referred 
to this ‘‘handicap of distance’ and in the mineral industry this 
handicap has been the hundreds or even thousands of miles separat- 
ing mine and market. Costs of transportation have to be reckoned 
with when we figure the availability of a specific deposit as a con- 
tributor to the Nation’s needs. 

Our country happens to be of continental extent, with the result 
that trade between the states possesses a certain similarity to inter- 
national trade on the Continent of Europe. For example, the move- 
ment of Minnesota iron ore to Pennsylvania furnaces and of Swedish 
ore to furnaces in the German Ruhr means in each case a journey 
of approximately one thousand miles and a comparable division 
between rail and water transport. The one outstanding and sig- 
nificant characteristic of these long-distance hauls of ore and coal 
and metals within the United States comes from the fact that our 
Constitution prevents the erection of any barriers to commerce 
““among the several states.” The founders of the new nation saw 
the logical connection between political and economic union, and 
the interstate commerce clause was their wise recognition of the 
principle that no state can or should live unto itself. 

The country’s reserves of one or another mineral are commonly 
measured in tons, but the dollar mark of price becomes the unknown 
variable, the presence of which puts wide limits on the tonnage 
actually available. Those three short words ‘‘at a price’’ will 


[9] 


10 


ordinarily warrant the most optimistic estimates. Thus, with 
respect to most of the metals we may think of goodly reserves being 
made available by reasonable price increments, though for a few, 
such as platinum, nickel, and tin, which are very sparsely distributed 
in the rocks of the United States, this rule would almost certainly 
- fail. On the other hand, with other metals a high price would make 
available large ore deposits of a grade far too low to be now utilized. 

The true measure of any kind of reserve, however, is the rate of 
consumption. That rate reacts with and upon price, and it ad- 
vances in response to inventions, whether of new methods of pro- 
duction or of new uses, and declines in response to the discovery 
or price-lowering of substitutes. Some, perhaps, of these interactions 
of price and use can be forecast: the use of lead in storage batteries 
could stand an increased price that would eliminate lead in paints. 
Or regarding the rivalry between aluminum and copper, for certain 
uses, interesting conjectures might be made. 

In considering the ultimate limits of a nation’s wealth in minerals, 
it is proper to distinguish between minerals that are dissipated or 
consumed in the using—as, for example, the fuels—and those of 
which we are accumulating a working capital—as, for example, 
iron and copper. Even the same metal may be consumed in dif- 
ferent degrees: the copper trolley wire suffers an actual loss in use 
not shared by the copper transmission line not far away. A still 
greater contrast between the metal which is repeatedly reinvested 
in new uses and that which is used only once is afforded by the 
copper and brass used in building construction, practically all of 
which eventually returns to the furnace, and the brass wire used in 
making pins, which leaves the brass works by carloads and never 
reappears in the metal trade. 

Adequacy of supply is a concept that eludes definite assertion; 
at least two variables enter into the equation when we attempt to 
translate our ideas of national reserves into years. Even broad 
classifications of mineral raw materials in terms of international 
trade are subject to frequent amendment, as is shown by a com- 
parison of such a list given by Professor Leith in 1918 with later 
lists prepared by a committee of which he was chairman. Yet 
these very changes have tended to perfect our theories relating to 
self-sufficiency. 

The broadest classification of natural resources is that of energy 


[10 ] 


II 


resources and industry’s raw materials, and it is by reason of its 
wealth in energy resources that the United States stands out among 
the nations—here we truly appear self-sufficient for a long future. 
Both in the quantity of power now used and in the energy stored 
up for future use the United States is preeminent. This abundance 
of mechanical energy, with which to lengthen and strengthen the 
arm of human labor, both increases the demand for industrial raw 
materials and increases our supply of metals, for instance, through 
reducing the mining and metallurgical costs. Herein lies the greatest 
stimulus to inventive genius, and the result is to make us not only 
greater consumers but greater producers. The net effect on our 
self-sufficiency in raw materials cannot be predicted. 

It is this sufficiency in power that makes America’s future seem 
bright. Careful distinction needs to be made between the adequacy 
of our water power, of our coal reserves, and of our supply of oil 
and gas, but together these sources of energy have made the people 
of the United States the greatest power users of the world—roughly 
we use ten horse power hours each week day for every man, woman, 
and child in the country—and yet there is a safe reserve for the future 
in the coal beds and the rivers of this broad land. 

Our natural resources warrant this faith in the future of our 
national prosperity and progress, but our outlook should be broad 
enough to include the whole world. Past and present experience 
teaches us that the greater our industrial development the greater 
need will we find for foreign sources of raw materials and for foreign 
markets in which to sell our products. American consumption of 
raw materials, both for our own use and for export products, is 
already geared too high to disregard or disdain foreign sources. 
Exchange of commodities thus becomes more rather than less neces- 
sary, and foreign trade is the essential adjunct to the highest de- 
velopment of our domestic industry. 

The American corporation in its marketing program has sought 
to supply the world, even to the point of waging skilful campaigns 
for creating a demand for the American product, with the result 
that although the homesick American traveler may miss the vision 
of his well-beloved flag, rarely is he out of sight of some familiar 
trade-mark. 

The open door in the market sense, as I understand it, means 
freedom to buy and sell in any country on equal terms with other 


[ir] 


I2 


non-nationals. Whether we can properly ask or expect equality 
with nationals depends upon our own practice—the test of the 
Golden Rule. 

American labor with its unique endowment of power can be 
expected to hold its own in foreign markets. A favorable balance 
of trade, incident to the exchange of manufactured goods for raw 
materials, provides new capital, a natural outlet for the use of 
which, at least in part, is foreign investment, especially in the de- 
velopment of raw-material sources. Indeed, it is essential that 
American capital take this course to insure the continued prosperity 
of the home enterprises in which American labor also has so large 
a stake. And rightly conducted, with the present-day policy of 
introducing American standards of sanitation along with American 
methods of mining, the entrance of the American corporation can 
greatly benefit frontier peoples in connection with the development 
of their resources. It may be debatable, at present, whether the 
wide-open door for such development should be regarded as a privi- 
lege ora right. The Golden Rule is but another name for reciprocity, 
and it absolutely determines the inherent equities in any claims we 
may make for the right to discover and develop the natural wealth 
in the territory of another nation. Whether or not we accept the 
doctrine that a Nature-endowed nation should regard itself as trustee 
rather than owner of its resources, we may see more and more 
clearly that the common interests in a growing trade tend to bind 
nations together, and that the ideal is to have the currents of inter- 
national exchange flow wherever they are guided by the trade winds 
of supply and demand. Embargoes and export duties at present 
put some limits on free movement of raw materials, and among 
the countries of the world the open door to the enterprise of others 
than nationals is far from universal. 

The extraordinary demands of a war program awakened us from 
some of our dreams of self-sufficiency. Blockades and shipping 
shortages were the hard facts that demonstrated inadequate supplies 
of essentials, and incidentally we learned the radical difference 
between essential and non-essential uses of raw materials. In time 
of peace the practical advantages of foreign trade appear to offset 
the theoretical advantages of independence in raw materials. But 
when the possibility of war is entertained, at once national self- 
sufficiency in raw materials assumes largest importance. Any 


C12] 


13 


worthy program of preparedness against war must include the 
possession of reserves of every one of the essential raw materials, 
in the ground or in stock as the particular limitations of each may 
dictate. To find the facts and to face the facts, and then to act, 
is a national duty. 


[13] 


14 


ECONOMIC RELATIONS BETWEEN 
RAW MATERIALS, PRICES AND STANDARDS OF 
LIVING: THEIR INTERNATIONAL EFFECT? 


L. L. SUMMERS 


Consulting Engineer, New York; Formerly Technical Adviser, War 
Industries Board; Chairman in Europe, War Industries Board; 
Technical Adviser. American Commission to Negotiate 
Peace, 1919 


When the angel of peace and plenty deposited her precious cargo 
upon this earth, the distribution of it was far from uniform. It is 
gradually becoming evident that peace and plenty may best be 
obtained by the interchange of essential commodities. Monopolies 
improperly administered engender reprisals, and their permanency 
is as impossible as is the permanency of any policy based on mili- 
tary might, upon which attention has largely been focused. Less 
importance has been ascribed to industrial might, notwithstanding 
its potential possibilities of defeating that ethical concord which 
we may term “‘justice.”’ 

Thousands of years have been spent in an effort to seek some 
measure of ethical concord between the peoples of a race. A famous 
English rabbi stated recently that whereas the Jews were unable 
to accept the Christ of Christianity, they might willingly accept the 
Christianity of Christ. By enlarging this principle to include the 
ethics of Confucius, Buddha, Mohammed, Moses, and Christ, 
regardless of leadership, we find an inherent sense of ethics com- 
mon to all races and to all men which may constitute a basis for the 
interrelations between peoples as well as between individuals. 

We may accept without controversy the feeling that the growing 
intimacy of peoples has been fostered by this inherent ethical con- 
cord and encouraged by communication and transportation. Na- 
tions have primarily developed ethical methods in dealing with 
their nationals collectively as evidenced by the great lawgivers 
from the dawn of history, but practical existence has prevented 
the full realization of these ethical hopes. We may fairly assume 


1 Reprinted from the Proceedings of the Academy of Political Science, Volume XII, 
Number 1, July, 1926, pp. 123-134. 


Cra] 


15 


that modern jurisprudence represents the present limits of realiz- 
ing ethical ambition. Notwithstanding the underlying unity in 
national ethics, the expansion of these principles to an international 
basis has been in continuous conflict with national ambitions, 
national fears, and national policies. 

It is singular that the experience of over a thousand years of 
chaos in Europe has left so slight an impression. Europe emerged 
only when isolation was broken down, the feudal baron suppressed 
and the realms of duke and prince merged into kingdom and empire. 
History, therefore, suggests the advantages of more intimate re- 
lationships and the need of some concrete form of international 
cooperation. This is now being hastened by the growing con- 
viction that industrial might may develop antagonisms and con- 
flicts just as unethical and fraught with just as much danger as 
conflicts for military supremacy. 

National sovereignty is generally admitted and this admission 
carries the right of any nation to enact such measures as it may 
deem proper in order to engage in, protect, or expand its national 
industries regardless of the effect upon any other nation. The act 
of one nation may naturally force other nations to act in like manner. 
Such acts may be offensive, defensive, or altruistic, as circumstances 
may determine, but in the end they inevitably develop measures of 
retaliation. Practical jurisprudence has, in general, recognized a 
difference between offensive and defensive, but when governments 
grant themselves immunity and their national sovereignty is un- 
questioned, the responsibility for provoking industrial strife is 
evaded. 

If government were to endeavor to ascertain the effect produced 
upon other nationals by contemplated government measures, the 
possibilities of industrial strife would be greatly diminished. Gov- 
ernmental forethought of this kind, however, is so rare as to be 
almost non-existent. We may well ask how such an international 
situation could possibly have arisen when it is self-evident that the 
growing consumption of world’s goods coupled with the unequal 
distribution of fundamental raw materials must inevitably lead to 
competitive conflict. In general, these resources have not been 
administered by government. The world war forced the various 
governments to become parties to the development and administra- 
tion of a great many of these resources. This action definitely 


[15] 


16 


crystallized the possibilities of governmental cooperation with in- 
dustry, not only resulting in increased revenues, but increasing the 
industrial might of government. 

Immunity of government has revived the privileges of ancient 
feudalism. The feudal baron was essentially a product of isolation 
and not subject to any particular ethical regulations. He could 
grant himself immunity from the consequences of his acts. This 
policy of isolation did not, however, perish when he was suppressed. 
It has endured and is not confined alone to international dealings, 
for there is abundant evidence of the practice of isolation reflected 
in inaugurating national policies based upon isolated or uncorrelated 
facts. The isolationist, always a specialist, bases his acts on uncor- 
related facts as opposed to the scientist who deals with correlated 
knowledge. Our own nation provides typical examples. One of 
our isolationists wants to diminish the inbound traffic to this country; 
another isolationist wants to raise the cost of production which 
results in a decrease in outbound traffic; a third wants to handle 
the traffic, but finding a diminished traffic as a result of the efforts 
of the first two, wants to collect a revenue from the traffic which 
does not move so that he may be able to transport the traffic which 
does move. He calls this a subsidy. 

The views of the isolationist may be tolerated in his own nation 
since his countrymen are either too much influenced by ulterior 
motives or too simple-minded to protest against his policy, but it 
does not follow that the people of other nations will fail to recognize 
the motives, or have the same simplicity. 

If national sovereignty continues to violate pings of inter- 
national justice, or adopts a policy of isolation, there must always 
exist an atmosphere of futility surrounding any international 
conference. 

International barter and trade have existed since the flood, and 
accepted rules of conduct were developed. The injection of goy- 
ernment, with its ambitions of greed and avarice and the sword 
as the unit of value has interfered with what might otherwise have 
been a normal development. 

Governments are concerning themselves more and more with 
matters of trade barriers, with sovereign power to regulate, suppress 
or prohibit; but with a self-granted immunity from consequence, 
and assuming no responsibility. Self-granted immunity, however, 


[16] 


17 


does not eliminate consequences, and man’s fear of consequences is 
more deep-rooted than his fear of God, if only for the reason that 
the results are more immediate. 

Our own nation is now trying a huge experiment of simultaneously 
restricting the importation of men and materials for the altruistic 
purpose of raising the standards of living. This purpose is ethical 
in the highest sense, but is also a development of war conditions. 
Our old economic friend, the law of supply and demand, suspended 
animation under war conditions, when there was a huge demand 
and a limited supply. Why not perpetuate this idea—shut off 
supply, up goes demand; and there you are! It should be noted, 
however, that the standards of living of the world are not included 
in this program. Our altruism applies to our nationals only. 

The economist may gasp a little and wonder whether the standards 
of living are not interconnected with prices of commodities, and 
therefore with international money values, and if so, whether gov- 
ernment fiat can be maintained. He has heard something of fiat 
money, and wonders if it can be measured in international units, 
for he has failed to develop an abiding faith in units of political fear 
or political ambition. Political units are not correlated interna- 
tionally and therefore are difficult to measure in equivalents. 

Some interesting sociological as well as economic features are 
included in this attempt to elevate standards by a sudden jerk 
rather than by an orderly process in keeping with the principles of 
evolution. Are the standards of living of all workers to be raised? 
Does it apply alike to the agriculturist; to the brain-worker, and to 
that great class which cannot respond to a demand for immediate 
increase of output per man? What are the effects of raising the 
standards of living? Are we to assume that income is raised and 
prices remain unaffected? Or are prices to be raised simultaneously 
with income? If an increased cost of production is not to be re- 
flected in an increased price, it would seem necessary to look to 
science and invention for an increased output per man in order to 
compensate. That part of industry which cannot respond to an 
increased output per man will naturally face an increased cost of 
production. Is there any relation between output and its market? 
Does a resort to mass production to diminish the cost per unit mean 
that markets automatically absorb this increased production? 
Surely, the growth of advertising and installment buying indicates 


[17] 


18 


the contrary and few will dispute that limitations of mass produc- 
tion are reached in a saturated market. Must excess output seek 
international markets, and is this in keeping with the principle of 
isolation? If we seek international markets, we must use interna- 
tional units of value and the fiat of government terminates at the 
national boundary. 

Let us consider how universal this raise in standards of living 
is to be. Domestic labor will gravitate to industries that can pay 
higher wages. Only the inefficient and defective remain. The 
agriculturist realizes that standards of living are’ being reflected in 
the things he buys. When industry raises the price of labor and 
attracts labor away from the farm, the farmer, facing a turnover 
controlled by seasons, and expenditures continually increasing, 
finds his market definitely related to population and therefore re- 
stricted. Further, appetites for luxury seem to multiply more 
rapidly than appetites for the necessities of life, while still another 
uncorrelated ethical experiment has affected the consumption of 
his corn, barley, and rye. Shall he, too, seek international markets 
for his surplus? Must he curtail production, resort to international 
“‘dumping,”’ or abandon the unprofitable farm? 

If we consider the sociological effects of this raising of standards 
of living, it is increasingly evident that they do not apply equally 
to all. As domestic service becomes more unsatisfactory, gregarious 
habits of living must follow and the individual home be limited to 
a size capable of being operated by the family unit. If infancy and 
childhood continue to lack caretakers, children must become wards 
of the state, or parentage be restricted. We should not be too critical 
of these sociological influences, for any final measure of beneficence 
is determined by the effect on general welfare. 

We cannot deal too literally with standards of living—as though 
they were measurable quantities which would grade 100% for 
a cosmopolite and 0% for a Trappist Monk. This would be a 
materialistic rating. From a spiritual standpoint, however, the 
ratings might easily be reversed. Industrially, at least, there exists 
a relation between raw materials, prices, and standards of living 
which require correlation. 

Other nations may take advantage of invention and the teach- 
ings of science; for our angel of peace and plenty did not confine 
these gifts to one nation; they belong to humanity and are the 


[18] 


19 


heritage of intelligence and culture. We then face the situation 
where equality of methods may exist, but with an inequality in 
the price of man power. This again points to the necessity of inter- 
national cooperation. The isolationist is no longer the possessor 
of an oasis in a desert, for the shifting sands may bury his oasis 
and he becomes a part of the desert once more. 

But, say certain thinkers: 


This situation cannot arise because the raising of standards of living 
is a great ethical principle founded upon the most fundamental belief 
of evolution—the necessity to survive. Necessity forces management 
to adopt labor-saving devices; it is not optional. Labor has begun 
to appreciate and must ultimately accept the principle that it is not 
hours of work but quality and output that count, with individual 
skill and efficiency rewarded. Man-power is precious and must not be 
wasted. The international situation will not reach an equilibrium 
by dragging down progress, but by uplifting it. It is right to insist 
on compulsory education and the control of child labor, for this 
means diminishing illiteracy and developing intelligence, the value 
of man-power being increased thereby. Mass production can be 
successfully applied only by intelligence utilizing science and in- 
vention and hence intelligence, and not units of masses of men, 
becomes the unit of measurement of success. Density of population 
never has been a measure of progress and cannot be considered more 
than a symptom of our animal origin, a relic of the days of low in- 
telligence when pestilence and famine, scourge and flood, were attri- 
buted to the wrath of God, the only means of meeting these devas- 
tating losses being to beget more victims. Intelligence demands 
higher standards of living, and only intelligence can produce them. 
The fittest only survice. Men may be equal, but not in intelligence. 


Have these advocates failed to remember that stern necessity 
is the taskmaster, and that the weak, the maimed and the mis- 
guided have found no place? If ethical teachings are to persist, 
must not society in general assume obligations? All labor must 
have a minimum living wage and if the standards of living are raised 
to a point where many cannot deliver an equivalent value, society 
must take steps to protect itself or necessity will develop methods 
of making an easy living without delivering this value. Under such 
conditions, crime and speculative chance are encouraged. 

Foundations are not necessary in our present-day castles of. 
isolation built by popular fancy. This same popular fancy is prone 
to dwell on Washington’s dictum to his countrymen so often quoted 
with regard to foreign entanglements. Does popular fancy stop to 
think of what Washington practiced? Even he, expediency dic- 


[19] 


20 


tating, resorted to international cooperation when the aid of France 
was solicited and accepted. 

Events are moving rapidly. To feed the maw of this monster 
of mass production, the world’s materials must be available in ever- 
increasing quantity. As soon as an isolated nation reaches a point 
where its own materials no longer meet its rate of consumption, it 
becomes dependent. It must develop substitutes or the national 
boundary will limit supply. Nations with the available materials 
have at once the power to determine what the mass production of 
their less fortunate neighbors shall be and may exact an exorbitant 
price, possibly by way of retaliation for restrictions in the past. 

The situation today in certain raw materials is illustrated by rub- 
ber, where consuming some 70% of the world’s output, we produce 
practically none and control in foreign countries less than 5%; 
newspaper print, where we produce 50% and import 50%; petroleum 
where, producing 70% of the world’s supply, we are importing some 
10%. There is an ever-growing list of these materials, and if we 
consume them regardless of their origin and continue our policy 
of isolation, the possibilities of retaliation become immediate.1 

[I have mentioned three raw materials, as they typify three condi- 
tions—one in which we consume a large proportion of the world’s 
supply and produce practically none; another in which we produce 
about one-half of what we consume; and the third in which we pro- 
duce a large proportion of the world’s supply and yet import about 
10%. ; 

At the risk of overstaying my time and your patience, I should 
like to comment a moment on the international effect of these 
percentages. 

Our distinguished chairman of this evening as chairman of the 
Price Fixing Board during the war, spent a great deal of time with 
others on the question of what percentage of a material dominated 
the price and how this percentage, often a small one, and usually 
that of an inefficient producer, could be handled. We commonly 
called this letting the ‘‘tail wag the dog.’’ It is illustrated for 
instance by my war colleague, M. Loucheur, when he states that the 
30 million bushels of wheat which France is forced to import fixes 
the price of the 325 million bushels of wheat which France produces. 

1 The following paragraphs, here enclosed in brackets, were interpolated by Mr. Summers 


as extemporaneous remarks, at this point in his paper, and are reproduced here because of 
the great interest which they aroused on the part of the audience. 


[20 ] 


21 


It is interesting to note that this 30 million bushels of wheat is only a 
part of the export surplus of Canada and the United States, and the 
price of this 30 million bushels of wheat is largely dominated by 
Chicago quotations. You will note that the Winnipeg quotations 
and the Chicago quotations differ by only a few cents, being in 
general the same. It has been estimated that the cost of producing 
a bushel of wheat in Canada is 80 to 85 cents, while it is $1.30 to 
$1.35 in America, and yet the Winnipeg quotation reflects the 
American cost of production and not the Canadian cost. / 
With our high standards of living and high price of commodities 
which our wage rate supports, we are not affected; but when the 
French farmer can get this high price of the high-cost producer, he 
is in a very prosperous condition. He does not recognize the finan- 
cial situation of France nor is he gravely concerned about the prob- 
lems of balancing the budget. His prosperity is an excuse for his 
indifference notwithstanding his national patriotism. When we cross 
the channel into England and visualize the strike condition now 
existing [May, 1926], we see the miners offered a 14 or 15 per cent 
advance on their 1914 wage; that is, a wage of 114 to II5 per cent; 
but the commodity index of Great Britain is 165 to 170, and this wage 
rate is therefore inadequate to provide the necessities of life. In gen- 
eral, the farm products reflect indirectly the world prices of wheat 
and therefore even the meat prices are correspondingly raised as the 
food fed to live stock in a great measure determines the price of 
meat. Further, the price of leather is affected very directly by the 
price of meat, so that in general, in Europe the costs of the necessities 
of life are reflecting the prosperity of America, but neither their 
industries nor their wages are directly sharing in this prosperity.]! 


1 Immediately following this address, the writer was challenged by a number of very 
able economists who held he was indulging in fantasy and violating the laws of economics. 
They stated the 30 million bushels of wheat which France imported did not fix the price 
of wheat in France any more than the 325 million bushels which France produced; that it 
was the total world’s supply and the total world demand that fixed the international price 
oH wheat and that the international market was at Liverpool and not in Chicago or 

innipeg. 

A number of spirited arguments were indulged in and I told my critics that they have 
never known what the world’s supply and the world’s demand for any year has been. The 
incomplete figures they collect are secured from twelve to twenty-four months after the 
wheat has been consumed for that particular year. I beg to challenge the economists in 
thus rigidly applying the law of supply and demand for in a large number of cases they 
neglect the element of time. Time enters specifically into the application of the law of 
supply and demand. One may call this a relativity because it is the relation of the flow of 
supply to the current demand. My critics’ attention is called to the fact that Liverpool 
does not fix the world prices; it simply reflects the world prices and the world movements of 
wheat. The deliveries and settlements of the grain exchanges are on a monthly basis 
and the actual quotations change weekly, daily, and hourly. I compare such economic 
arguments with the following analogy, All will agree that rainfall is the source of supply 


[21] 


22 


We cannot fail to observe that the efforts this nation has made to 
follow a policy of isolation in the restrictions it imposes have already 
uncovered serious weaknesses—first, because it must negotiate 
beyond its own borders for essential raw materials; second, because 
it must go beyond its own borders to market its excess production. 
Therefore, both in the beginning and in the ending of this policy 
there appears to be a limit. We have constructed a building, but 
the foundation appears to be cracking and the roof leaks. We may 
continue to jazz, but only in parts of the building. 

Is there a remedy? It would seem that careful diagnosis of the 
disease is essential lest some cure may prove only a nostrum. Trade 
has adjusted its difficulties in the past by means of bargaining. 
If a rubber grower, for instance, realizes the value of his product 
which a consumer requires, he has the right to set the price. . Is one 
government to erect trade barriers protecting a wage rate of $5.00 per 
day, and deny another government the right to erect compensating 
barriers, and insist, for instance, that their wages remain at 20 cents 
per day? It may be claimed that their standards of living are not 
equal, or that the intelligence of their workers does not warrant an 
increased rate. This may be true. But we are talking now about 
one nation assuming a right and denying the same right to another 
nation. Trade would attempt to solve this difficulty by finding 


of water power. But to hold that this directly controls the supply of power is an obvious 
fallacy, neglecting other important factors. The engineer must know the height of the dam 
and the reservoirs that are available to equalize the flow. The levers that control these 
reservoirs are like the levers that the large grain dealers control. The vast elevator sys- 
tems of America and Canada are built for the purpose of controlling the flow as well as 
for storing the supply. The grain dealers must have daily information concerning the 
visible supply, the cargoes afloat and the arrivals. It is this rate of flow, with the power 
to augment or diminish it, which affects the world's prices. The mere fact that the Amer- 
ican Government has seen fit to interfere with the trading of grain on the Chicago market 
and in general the blind idea that short selling and large market operations are wrong 
has detracted from the importance of the Chicago Board of Trade and made Winnipeg the 
free grain market and therefore the greatest primary market in the world. Economic 
dementia simply causes economic centers to migrate. It does not exterminate them. 

As opposed to these efforts to regulate the grain market, it is interesting to point to 
the Canadian Government's licensing of elevators and fixing prices for handling and stor- 
age, in an effort to make freedom of opportunity, rather than to suppress the freedom of 
operation when the world situation is in a constant state of flux. I am free to admit that 
with the return of Russia and Roumania as producers of an exportable surplus of wheat, 
the world’s market will not respond as readily to the levers operated at Chicago and Winni- 
peg. My critics must bear in mind that demand itself is a variable and is modified by the 
use of substitutes and when the huge crop of Russia’s rye appears on the world’s consuming 
market, another important element in the demand for wheat will again be at work. Just 
as the substitutes for wheat affect the demand, so the amount of wheat used on the farm 
for seeding and what is known as the seasonal carry-over, affects the supply; so, of the total 
crop some 25% never appears on the world’s markets. In cases of grave shortage, some 
of this is coaxed into the world market, but it is these factors affecting both the supply and 
demand and the impossibility of getting any accurate figures from Russia, China and India 
which has made it impossible to secure correct figures on the world’s total supply or the 
world’s total consumption. 


[22] 


23 


out what the rubber grower wanted which was difficult for him to 
obtain. We might trade him containers for his rubber sap or assist 
him in developing his resources. This might satisfy him, but his 
government steps in and seeks compensation. Our sap containers 
may not interest his government. Furthermore, it may not desire 
alien interests to share potential possibilities, and may desire pay- 
ments in political units of value. A rubber consumer, however, 
cannot purchase these political units for purposes of exchange, as 
this involves the question of bribery. He soon realizes that in 
dealing with governments, he faces new obstacles. Shall govern- 
ments adopt the methods of trade and inaugurate a system of bar- 
tering? Trade one barrier against another? We must admit the 
necessity for barriers, whether used to produce revenue or to equal- 
ize conditions. The erection of barriers by government ostensibly 
for the purpose of creating equality often develops inequality by 
intensifying some natural advantage carrying inherent political 
possibilities. Governments, as trustees for their people, dare not 
freely trade in international political possibilities. Ethics and poli- 
tics are poor bedfellows. Politics shift. Ethics remain. 

Justice, more enduring than politics, has introduced reciprocity 
into international dealings. Reciprocity did not contemplate the 
reciprocal raising of one barrier to meet another, nor did it contem- 
plate any nation imposing a barrier on commodities not advanta- 
geously produced by it, which might seriously affect the welfare 
of a nation producing them. Rather, reciprocity involves the ac- 
ceptance of some commodities from nations better qualified to pro- 
duce them. Reciprocity involves an interchange of selected man 
power wherever of mutual benefit. In general, reciprocity contem- 
plates an international correlation of restrictions recognizing that 
the injuries inflicted require as much consideration as the advantages 
obtained. 

Two courses are definitely indicated—one leading to isolation; 
the other to international cooperation. The one confines distribu- 
tion largely to national boundaries and*depends upon available raw 
materials or the production of substitutes. The other contemplates 
a world market and points to methods which will develop and dis- 
tribute world materials equitably. 

All ships of commerce sail the seas unmolested and unrestrained. 
Sovereignty and dominion formerly exercised have now ceased to 


[23] 


24 


exist. Gone also are piracy and the fear of might. Dimly we recog- 
nize and vaguely we realize an international awakening where, with- 
out coercion, might is displaced by voluntary acceptance. In that 
day of voluntary acceptance, which also means voluntary relin- 
quishment, we place our hope, for it is the day of international jus- 
tice. We cannot ignore Ethics; or Justice, its offspring; one, the 
mother of civilization, the other, its sole defender. 


[24] 


25 


ECONOMIC AND POLITICAL EFFECTS OF 
GOVERNMENTAL INTERFERENCE WITH THE 
FREE INTERNATIONAL MOVEMENT 

OF RAW MATERIALS} 


DR. E. DANA DURAND 


Chief, Division of Statistical Research, Bureau of Foreign and Domestic 
Commerce, Washington, D. C. 


As a background for a discussion of the principles involved in 
governmental interference with trade in raw materials, it is worth 
while to present the salient facts with regard to three typical com- 
modities as to which governments are in fact at the present time 
engaging in such interference. We shall take as examples rubber, 
coffee, and nitrates. ; 

The enormous increase in the world demand for rubber, due 
primarily to the development of the automobile, is familiar to all. 
World production increased from about 80,000 tons in 1910 to more 
than 500,000 tons in 1925, and imports into the United States in- 
creased from 40,000 tons to 397,000 tons. Consumption in this 
country during recent years has represented approximately seven- 
tenths of total world consumption. Formerly rubber was chiefly 
obtained from wild trees, largely in Brazil and other tropical Amer- 
ican countries. Plantation production, chiefly in southeastern 
Asia, began on a large scale just before the World War, and is now 
the dominant factor. Costs of plantation rubber are far lower 
than those of wild rubber, which explains the fact that during most 

‘recent years, until the great advance in 1925, prices have been 
much lower than before the war. 

A dominant proportion of the world’s rubber is at present pro- 
duced in British Asiatic territory, principally Malaya and Ceylon. 
From 1918 to 1920 output in this British territory was almost three- 
fourths of the total of plantation rubber, but the proportion has 
since fallen, and was about 57% in 1925, while the plantation rubber 
in that year represented about 93% of all rubber produced. The 


area planted in this region had increased immensely during the war, 


1 Reprinted from the Proceedings of the Academy of Political Science, Volume XII, 
Number 1, July, 1926, pp. 135-144. 
[25] 


26 


throughout which and for two years following high profits were 
realized. Fora single year only, 1921, following the lapse of the post- 
war boom, United States imports of rubber fell off sharply and the 
average import value per pound, which had been 43 cents in 1920, 
fell to 18 cents in 1921. More trees meanwhile were coming to bear- 
ing age. Large stocks were accumulated so that although imports 
rose again greatly in 1922 and much exceeded even post-war boom 
records, the price was still relatively low. It should have been easy 
to foresee that United States consumption would continue rapidly 
to increase and to catch up with productive capacity, but the 
planters in the British colonies were unwilling to wait for the re- 
covery of the market through normal causes, and a scheme for re- 
stricting exports of crude rubber was devised. This became effective 
November 1, 1922, with the announced intention of maintaining 
a price of 36 cents per pound (18 pence, London) which was declared 
to be fair. A ‘‘standard production” was fixed, each plantation 
being given a definite quota, and the percentage of standard produc- 
tion that could be exported (save by the payment of a prohibitive 
tax) was fixed from time to time according as the price of rubber 
should fluctuate above or below 30 cents. At the beginning of 1925 
the average price in New York was a little over 36 cents per pound, 
and the percentage of exportation allowed as compared with the 
standard was only fifty. ‘‘Standard production” had been increased 
somewhat since the initiation of the scheme to take care of the new 
trees, previously planted, which came into bearing. 

As a result of these restrictions in the face of steadily rising de- 
mand, the stocks which had been accumulated in London were 
rapidly reduced: from 72,000 tons at the end of 1922 they reached 
29,500 tons at the end of 1924 and only 6,000 tons at the end of 1925. 
Stocks in America also fell off, though not so greatly. Manufacturers 
of rubber products, fearing a shortage, scrambled to get supplies. 
Advantage of the situation was taken by speculators. A runaway 
market resulted and in the short space of seven months the New 
York price nearly trebled, averaging $1.03 for July with a maxi- 
mum on one day of $1.21. Of course, the permissible quotas of 
exportation were raised, but as the plan contemplated changes only 
once a quarter the quota was still below standard production, namely, 
85%, at the close of 1925, and only in February, 1926, was it raised 
to 100%. 


[26 ] 


27 


Rubber imports into the United States in 1925 cost us $430,000,000, 
or about $200,000,000 more than they would have cost at 1924 
prices. Had the levels attained during the last half of the year con- 
tinued through 1926, we should have had to pay several hundred 
millions more this year. In February rubber imports were valued 
at over $70,000,000. ; 

Active agitation in the United States against these exorbitant 
prices, in which the Department of Commerce took an important 
part, resulted in curtailment of tire consumption and ultimately, 
after the expiration of contracts previously placed, in a reduction 
of imports. The result was a fall in the price of rubber quite as 
rapid as the advance, although by no means reaching as low a figure 
as at the start, the prices now ranging between 40 and 50 cents per 
pound. 

Although not a few voices in Great Britain itself have been raised 
in protest against the continuation of the restriction scheme, it is 
still in effect. The so-called standard production has been and is 
considerably less than the actual capacity for production of the British 
territories, but the exports are still limited to the standard pro- 
duction, and as of May 1, 1926, a new step was taken aiming even 
more effectively to maintain prices. It is provided that should the 
London price of rubber fall below 1 shilling 9 pence (about 42 cents) 
the exportable quota shall be reduced by 20%, and there is no 
arrangement for increasing the quota above the ‘‘standard produc- 
tion,” no matter how high prices may go. 


Coffee differs from rubber in that the demand increases only 
gradually. World production is in the neighborhood of 2,700,000,000 
pounds annually, of which Brazil produces about two-thirds and 
the United States consumes about half. On the average for the last 
three years the United States has taken about 55% of all Brazilian 
exports of coffee. 

At three different times, about 1908-1909, again in 1918 and again 
in 1921, the State of Sao Paulo, backed by the central government 
of Brazil, has bought up coffee at times of relatively low prices and 
held it off the market. Since that time the Brazilian authorities 
have maintained the policy of limiting the quantity of coffee which 
can move to the ports and thus be exported. It is impossible to 
trace any such spectacular effects on prices as in the case of rubber, 


[27] 


28 


particularly because control in one torm or another has been exer- 
cised over such a long period of time. It is noteworthy, however, 
that during each of the last four years the average value per pound 
of coffee imported into the United States has risen. For 1921 it 
was about 10% cents and for 1925 over 22 cents. Coffee shows 
much greater advance over pre-war years than most commodities; 
the average import value from 1906 to 1915 was less than 10 cents. 


Chilean nitrate is a natural monopoly subject only to the com- 
petition of modern nitrate fixation from the air. Practically no 
nitrate is used in Chile itself. The United States takes nearly half 
of the Chilean exports, paying in the neighborhood of $50,000,000 
annually. There is an association of the producers embracing all 
except two companies owned by United States capital. The Chilean 
Government is a party to the association, having four of the eighteen 
directors. Output is limited and quotas fixed for each producer. 
Control of this sort has been practiced in one form or another for a 
long time so that it is impossible to trace through price changes 
the effects resulting. The Chilean Government imposes an export 
tax of about $12.50 per long ton, which adds about one-third or 
one-fourth to the selling price. A recent expert investigation by 
the Department of Commerce indicated that, apart from the export 
tax, the present price of Chilean nitrates, held down somewhat by 
competition of artificial nitrogenous products, is not very much 
above cost of production with reasonable profit to the less efficient 
producers but there is reason to believe that the more efficient 
can produce at a decidedly lower figure. 


With these facts before us, and bearing in mind that there are 
a number of other similar controls of export of raw materials and 
a manifest disposition to extend them, let us consider the ethics 
of such policies and their political and economic effects. 

In the first place, it should be noted that we are discussing govern- 
mental controls of exportation, not those resulting from purely pri- 
vate combination or association. However indefensible and dan- 
gerous may be, at least in some cases, private organizations for con- 
trolling domestic and export supplies and prices, they are much less 
likely to cause grave abuse than when the government steps in. 
Private organizations are limited by the fear of the secession of their 
own members or of the entrance of new competitors in the country 


[28] 


29 


itself, but governments with their sovereign power are subject to ng 
such brake. Moreover, governments work more ponderously and 
awkwardly and usually more unintelligently. Their measures may 
lead to unanticipated and unsought-for results, and the machinery 
cannot readily and promptly be adjusted to prevent or cure these. 
The British colonial authorities probably would have preferred to 
see less vertical advances in rubber prices as a result of their control. 

In the second place, the controls which we are discussing go far 
beyond any mere desire of governments to collect legitimate reve- 
nues. There may be exceptional cases in which a government is jus- 
tified in levying an export tax as the most workable method of ob- 
taining revenue from a given industry. There may be, at least in 
some cases, no very great difference, in effect on the outside con- 
sumer, between a tax on exportation of some commodity of which 
the local consumption is small, and a tax on the profit of concerns 
engaged in producing that commodity. A reasonable export tax, 
however, for revenue purposes is a very different thing from an 
exorbitant one, or from a tax or any restrictive measure which aims 
not at government revenue but at boosting prices for the benefit of 
producers. 

Again, governmental controls of raw materials which are at 
present attracting attention are by no means designed to conserve 
limited natural resources for the benefit of the people of the home 
country. No doubt there may be cases in which, to prevent unduly 
rapid depletion of mineral resources or of virgin forests, a govern- 
ment may be justified in restricting output; though in that case it 
ought obviously either to hold down prices to domestic and foreign 
consumers or to take the excess above a competitive price for the 
general treasury, rather than to permit excessive profits for pro- 
ducers. While perhaps the highest ethics would demand in such a 
case that the outside world should be given a share proportionate 
to its needs out of the restricted production, there is a good deal to 
be said even from the ethical standpoint in justification of the right 
of the people of a given country to consider its natural resources 
as primarily for their own benefit. In the cases at present attracting 
attention, however, we have to do either with agricultural products 
in which there is no question of depleting natural resources, or 
with a product, such as nitrate, which is in little demand in the 
home country itself. 


[29 ] 


30 


. Finally, it seems to me that a clear distinction may be drawn as 
respects ethical and economic aspects between government controls 
of exportation and protective tariffs restricting importation. What- 
ever one may think of the effects of a given tariff system upon the 
well-being of the people of the country maintaining it, the foreigner 
has far less ground to complain of such measures than of restrictions 
upon exportation of raw materials and the fixing of their prices. 
If a protective tariff in fact builds up the industries and promotes 
the national welfare of the country imposing it, the outside world, 
considered as an aggregate, can scarcely fail to profit. In that case, 
the country by its greater buying power becomes a better market, 
not of course for the products subject to high tariffs, but for other 
classes of products, especially raw materials. Countries producing 
these gain. I have no occasion here to discuss the tariff question 
but it is clear that it is an entirely different question from that of 
governmental control of exports. 

With these distinctions thus drawn, the question still remains 
as to the working of these restrictive policies with regard to exports. 

Experience confirms what reasoning would lead us to expect, 
that government control of raw materials is likely to lead to very 
serious abuses and injustices. If it succeeds temporarily or per- 
manently in raising prices above a fair cost of production by the more 
efficient concerns, it works obvious injustice to consumers of other 
countries. There is a great difference in moral principle between 
measures which seek to promote the welfare of the people of a coun- 
try with no deliberate intention of injuring other people (even though 
incidentally some little damage may result here and there to others), 
and measures which aim directly to exploit the foreigner. The 
injury has wider repercussions than are obvious on the surface. If 
country ‘“‘A”’ by its action injures the consumers of country “B”’, 
it also indirectly does damage to producers of other commodities in 
still other countries whose well-being depends upon their trade with 
country ‘‘B”’. There is danger too of competition in the business 
of ‘‘spoiling the Egyptians,”’ to say nothing of reprisals by the Egyp- 
tians. If all over the world countries engage in a scramble, the one 
to exploit the other, there is simply no limit to the economic harm 
which is bound to result, as well as no end of the ill-feeling and 
friction. 

Government restrictions on exportation of basic materials are 


[30 ] 


31 


all too likely to go farther in boosting prices than originally con- 
templated. No doubt in some cases these policies have been ini- 
tiated under strong pressure, where abnormal conditions had brought 
prices temporarily to an unreasonably low level. There was a power- 
ful temptation not to wait for things to adjust themselves through 
recovery and growth of demand or through elimination of an undue 
number of producers by competitive processes, but to devise some 
means of immediate relief. No doubt most of those favoring such 
plans have contemplated at the outset only such a moderate advance 
in prices as ‘would prevent loss. But once such a policy is entered 
upon and some success achieved in advancing prices, producers and 
government authorities are all too likely to become greedy and to 
push the limitation of output and the advance in prices to wholly 
inordinate lengths. The sweets of power once tasted, the appetite 
grows apace. 

It must be borne in mind too that the producer of a basic raw 
material is not dealing directly with the final consumer, or even, 
ordinarily, with the manufacturer. It passes through the hands of 
middlemen. Where normal laws of supply are abrogated so that 
the course of prices cannot be forecast, speculation is bound to 
become rife. Under the influence of excitement and uncertainty 
prices may jump far higher than even the restricted supplies avail- 
able justify in relation to demand. The advance in prices may by 
no means all go to the producer; the greater fraction may redound 
to the benefit of the fortunate speculators. There is no doubt that 
such was the case in connection with the recent astonishing advance 
in rubber prices. 

Government control of supplies of commodities is likely to lead 
to heavy fluctuations in prices. A runaway market is almost sure to 
react violently. It is bad enough for legitimate dealers and manu- 
facturers handling or using a given raw material to have to guess at 
the changes in supply and demand due to normal causes, without 
having to guess at what governments may do—governments of pro- 
ducing countries and of consuming countries alike—or as to how 
prices will react to these abnormal interferences with supply and 
demand. The risks of doing business are enormously increased 
under these circumstances. In the case of rubber, for example, it is 
necessary for manufacturers to buy their supplies long in advance 
of the sale of finished products. If prices of raw rubber rise sharply, 


[31] 


32 


the manufacturer is likely to -be criticized if he at once puts up the 
prices of tires and other finished products into which is entering 
rubber bought some months before at lower levels. But if he fails 
to do so with sufficient promptness, he stands to be caught in heavy 
losses later on if raw material takes a tumble, since public opinion 
and competition of other manufacturers are almost sure to force 
rapid reductions in the prices of finished products. In other words, 
violent fluctuations of crude rubber prices involve very grave risks 
to rubber manufacturers and legitimate dealers. 

Apart from the injury to the interests of other countries which 
tends to result from government interference in export of raw ma- 
terials, there is in many, if not most cases, a probability that the 
country undertaking such measures will ultimately find its own well- 
being harmed. 

In the first place, it is likely in the long run to lose, relatively and 
perhaps absolutely, in volume of business. If the controlling coun- 
try has no absolute monopoly, the restriction of export and the 
boosting of prices furnishes a powerful incentive to the development 
of competitive production in other countries. This may readily go 
so far as ultimately to break down all possibility of control by any 
single country or group of politically affiliated countries, and to 
leave their producers with but a small share of the world market. 
It is noteworthy that production of plantation rubber has increased 
far more rapidly in non-British than in British territory during the 
years since restriction was begun. The British share of total plan- 
tation rubber output in 1922 was 72%, in 1925, 57%. Output in 
the Dutch East Indies had increased more than 85% during this 
period. The great advance in rubber prices in 1925 even stimulated 
wild rubber production in Brazil, although wild rubber cannot hope 
to compete with plantation rubber when prices are moderate. There 
are large areas in the world where rubber can be produced, and while 
it takes some years to get it under way, it is obvious that continued 
high prices would be bound gradually to bring such areas into com- 
petitive use. 

Moreover, extortionate prices cut down demand, and it is impos- 
sible to foresee how much in any given case this reduction may 
become, especially when national feeling is brought into play as 
well as purely economic forces. Reference has already been made 
to the manner in which American consumers of rubber met the 


[32] 


33 


situation during recent months. Encouraged by exhortations and 
suggestions as to methods from organizations of manufacturers of 
rubber and of automobiles, and from the Department of Commerce, 
automobilists cut down sharply their demand for tires, using their 
tires more carefully, repairing instead of scrapping them, making 
them last longer. From October, 1925, to March, 1926, it is esti- 
mated that sales of automobile casings by dealers were about 25% 
less than during the corresponding period the year before. The 
quantity of crude rubber used for manufacturing tire-repair mate- 
rials increased from 2,908 tons in 1924 to 4,319 tons in 1925, and 
during the last quarter of 1925 the consumption for this purpose 
was more than 70% greater than in the corresponding period of 
1924. There was also a powerful impetus to the reclaiming of old 
rubber. Shipments of reclaimed rubber by American plants were 
55% greater in 1925 than in 1924, and during the first quarter of 
1926 more than one-fourth greater than during the corresponding 
period of 1925. 

Over-grasping boosting of prices of raw materials too puts the 
world on its mettle to find substitutes, and in this modern day of 
rapid progress in physics and chemistry, there is no knowing what 
may be brought forth to put out of business the producers of present 
commodities. 

Finally, to my mind the most fundamental objection of all against 
the policy of restricting exports of raw materials—an objection both 
from the standpoint of the outside world and from the standpoint of 
the country maintaining the restrictions—lies in its tendency to 
check progress in efficiency of production. It is a damper to 
enterprise and ambition. The great merit of competition in industry 
is that it eliminates the unfit and lets the fit survive and grow. It 
not only permits progress but tends to compel it. Even a private 
combination of producers, aiming to restrict output and prices, is 
likely within itself to give some chance for the more efficient pro- 
ducer to get a bigger share of the business as time goes on. Witha 
government control of output, all is different. Subject to the polit- 
ical influence of producers—an actual majority of whom are often 
mare or less inefficient while only a smaller number can produce at 
reasonable.cost and can make progress in methods—the government 
tends to perpetuate the inefficient and hold down the efficient. It 
must give quotas for production or exportation to the high-cost 


[33] 


34 


producers at the margin, and in order to do so must restrict the 
quotas of the low-cost producers. There is no politically feasible 
way of eliminating the incompetent, and consequently no way of 
giving adequate incentive to the more competent to improve their 
methods. Nothing can be more stultifying to progress in industry 
than government interference with the expansion of the fit. If the 
world is to move forward it must be free from swaddling bands of 
this sort. 

This is far from being an ideal world. It is vain to hope that in 
the near future the political and economic relations among coun- 
tries will become altogether amicable. The lion will not lie down 
with the lamb, to say nothing of the elephant or the bear. But the 
people and the statesmen of the various nations of the world do 
have it largely in their power to refrain from adding to the causes 
of friction among them as well as gradually to wipe out some of the 
present causes of friction. There is grave danger that further ex- 
tension of the recent tendency toward the establishment of govern- 
ment controls of exportation of raw material will go contrary to all 
the hopes and aims of those who are seeking world peace, economic 
and political. Discriminatory measures breed retaliation, and inter- 
ferences with the normal laws of economics tend, once started, to 
pile up like a rolling snowball and to pile up at the same time in- 
ternational illwill. 


[34] 


35 


RAW MATERIALS AND IMPERIALISM! 


PARKER T. MOON 


Associate Professor of International Relations in 
Columbia University 


“The fight for raw materials plays the most important part 
in world politics, an even greater rdle than before the war.’’ These 
are the words of Dr. Schacht, president of the German Reichsbank, 
as reported in The New York Times of March 26, 1926. And his 
conclusion was that ‘‘Germany’s only solution is her acquisition 
of colonies.’”’ Dr. Heinrich Schnee, former governor of German 
East Africa, conspicuous since the Great War in the agitation for 
the restoration of some colonial territory to Germany, has made 
similar pleas, based on the assumption that great industrial nations _ 
need colonies to supply them with raw materials.? Fascist Italy? 
“must expand or suffocate,” Mussolini asserts. France owes her 
greatness to her colonies, which provide her with raw materials and 
markets, so we read in a recent book issued under the auspices of 
the General Staff of the French navy.‘ Nationalistic monopolies 
of raw materials, Secretary Hoover warns the world, ‘‘can set up 
great malignant currents of international ill-will.’’® 

Some of the reasons which lie behind such statements as these 
are worth stating and criticizing in this discussion, brief as it must 
be. All important industrial nations have become more and more 
dependent on imported raw materials. In some cases it is cheaper 
to import than to produce the raw materials: that is why England 
imports Australian wool. In other cases the domestic supply is \ \_ 
inadequate: that is why Italy has to import iron. Often industries | > 
are established where they can obtain coal or power, labor, and capi- 
tal, but not the raw materials they require: such is the situation 
of the British cotton industry. Or again, an industry may have 


1 Reprinted, by permission of the Macmillan Company, from Imperialism and World 
Politics, New York, 1926, pp. 543-557- . 

2H. Schnee, German Colonization Past and Future (London, 1926), and address in 
Proceedings of the Academy of Political Science, XI, no. 4, pp. 172-173. 

aN. Times, July 24, 1926. 

4J. Tramond et A. Reussner, Eléments d'histoire maritime et coloniale contemporaine 
(Paris, 1924), pp. 410-411. 
* Speech before Chamber of Commerce, Erie, Pa., Oct. 31, 1925. 


[35] 


36 


local supplies of its principal raw materials, and still need to import 
minor but essential ingredients: as the United States steel industry 
imports chromite from Rhodesia and Cuba. Taken in the aggregate, 
such imports have reached immense proportions. The value of 
imported raw materials consumed by the industries of the United 
States is shown in the following table: 


Year Imports of Raw Materials 
TREIGCOM Si en MSR PUL NN ease At Ao MG ele 8 $407,141 
127 en Te I eRe CUE a ae ah Per ihe ete 50,387,008 
OOO Mtr) (inn Osha e Mia hee 210,391,745 
TGOZ STI UNM tise ROME eR Lactate ete ea 1,430,012,763 


Great Britain’s needs are even greater. In 1900 she used foreign 
raw materials worth 172 million pounds sterling; in 1924, 400 mil- 
lions (two billion dollars). France in 1925 imported twenty-nine 
million francs’ worth; Germany, six and a quarter billion gold marks’ 
worth. In short, billions of dollars, francs, marks, lira, yen, and 
hundreds of millions of pounds sterling are reaching out into the 
most remote quarters of the earth to secure the ores, the fibres, 
the gums, which are fed into the hoppers of their factories. 

The quest for raw materials becomes imperialism when it deals 
with backward and tropical countries. Sir Frederick Lugard, British 
empire-builder, writes: ‘‘The tropics produce in abundance a class 
of raw materials and foodstuffs which cannot be grown in the 
temperate zone and are so vital to the needs of civilized man that 
they have in very truth become essential to civilization. It was 
the realization of this fact which led the nations of Europe to com- 
pete for control of the African tropics.’ And not only the African 
tropics! The process of extending control over tropical sources of 
raw materials is quite as active in the American, Asiatic, and Pacific 
tropics. One thinks of Cuban sugar and tobacco, Mexican oil, 
Manila hemp, Indian cotton, Malayan rubber. In tropical countries 
the large-scale production of plantation products requires fairly 
stable and favorable government. Planters want protection for 
their crops and their persons; oil men must obtain concessions; 
their bankers insist on security. How closely this situation is bound 
up with imperialism must be clear. One should add, that the same 
motive is operative also in non-tropical countries which have raw 


materials without strong and stable governments. Japanese efforts 
1 The Dual Mandate in British Tropical Africa (1922), p. 43. 


[36 J 


37 


to obtain control of Chinese iron mines and coalfields may perhaps 
serve as an illustration. 

The tendency of business men actively engaged in obtaining 
raw materials to ask protection and aid from their own government, 
and even to demand annexations, meets with a favorable response 
from the statesmen and the public in so far as the idea of national 
wealth is popular. Many a Frenchman, for example, looks on the 
phosphate mines of French North Africa as an addition to the 
wealth of his nation. Such material treasures are something the 
public-ean visualize, something the statesman can understand. Who 
can doubt that a colony with rich mines, or a mandate permeated 
with petroleum, is a prize worth winning, worth quarreling for, 
ean for? It requires either sophistication or high-minded- 
ness to entertain such doubts. The altruist denies that war for 
material gain is ethical. The student of economic imperialism denies 
that the average Frenchman gains any substantial share in the 
Tunisian phosphate mines, or the average Englishman in the Kim- 
berley diamond fields. If an Englishman wants an engagement ring, 
he pays for the diamond, as if he were not a fellow-countryman of 
the late Cecil Rhodes; if a Frenchman wants phosphate to fertilize 
his farm, he buys it at a price, and at approximately the same price 
that a Spaniard or an Italian would pay. inl 

The desire for colonial supplies of raw materials has been stimu-. 
lated since the Peace Conference by the inter-Allied debt situation 
and the depression of European exchanges. It has been argued 
that France can more easily maintain the franc and meet her obliga- 
tions if she obtains raw materials from her own colonies than if 
she has to buy them from foreign countries. Prominent British 
statesmen have applied the same principle to their own debt prob- 
lems. Premier Baldwin himself has asserted that the more Britain 
turns to her own Dominions for raw materials, rather than to 
America, the better it is for British exchange and for the payment 
of the British debt to the United States. At a recent conference on 
international relations,! a distinguished Swiss journalist, Dr. William 
Martin, expressed the opinion that the European countries needed 
to depend on their colonial resources in order to pay their debts 
to America. At the impressive British Empire Exhibition at Wem- 

1 National Conference on International Relations and Problems, Briarcliff Lodge, 


May, 1926. See the discussions, in Proceedings of the Academy of Political Science, New 
York, July, 1926. 
[37] 


ra | 


38 


bley the idea is put in the form of the slogan, ‘Keep your money in 
your Empire.” Into the intricacies of exchange, we cannot enter 
here. But we may observe that this point of view is exaggerated, 
to say the least. Except for Great Britain no European country 
can expect in the near future to depend on its colonies for the major 
(Portion of its raw materials. Italy, England, and France are paying 
deficits on colonial budgets and investing large-sums: of capital in 
colonial debts, railways, and other enterprises. Colonial raw mate- 
rials have to be paid for, even though in most cases the payment is 
not made through international exchanges. 

While Europe is growing more interested in raw material im- 
perialism because of debts to the United States, the latter is being 
aroused by its Department of Commerce for very different reasons. 
Secretary Hoover discovered the fact that “there are at present 
governmentally controlled combinations in nine! raw materials,” 
our imports of which, if prices remain at their present level, “will 
cost us about $1,200,000,000 for 1926.’ And there are ‘‘some twen- 
ty or thirty other commodities in the world which could likewise be 
controlled by action’ of one government or by agreement between 
two governments.’’ The attempt of governments to control prices 
of such monopolistic supplies “‘raises a host of new dangers.’ Mr. 
Hoover believes that it ‘‘not only threatens the sane progress of the 
world but involves great dangers to international good will.” And 
he informs us that the Department has ‘‘endeavored to stimulate 
our industries to provide for themselves independent sources of 
supply.” 

The rubber episode? was significant in showing not only the pos- 
sibilities, but also the limitations of such experiments. It helped 
to raise prices little when prices were too low, and too much when 
prices were too high. It occasioned a panic in the United States 
and called forth exchanges of recriminations across the Atlantic. 
It handed over to the Dutch a large share of the business which the 
British producers had hitherto enjoyed, and it stimulated American 
rubber companies to seek rival sources of crude rubber outside 


British Malaya. It was certainly no unmixed success. 


1 Egyptian long-staple cotton, camphor, coffee, iodine, nitrates, potash, mercury, rub- 
ber, and sisal. See Secretary Hoover's statement in Trade Information Bulletin No. 385, 
issued by the Department of Commerce. Also, Crude Rubber, Coffee, etc., Hearings before, 
the Committee on Interstate and Foreign Satie House of Representatives, 69th Cong. 
Ist Sess., on House Resolution 59 (1926) 

2See Parker T. Moon, Imperialism and World Politics, pp. 546-550. Seealso pp. 25-27 
and 56-58 of this document. 

[38 ] 


39 


Another kind of nationalistic interference with colonial raw 
materials has been exhibited here and there in the imposition of 
differential export taxes. The purpose of these is to give manufac- 
turers in the mother-country an advantage over other manufac- 
turers in purchasing raw materials. For instance, when the United 
States acquired the Philippine Islands the export tax on Philippine 
manila was increased from 373% cents to 75 cents per 100 kilos and 
in 1902, while this heavy tax continued to be levied on exports of 
manila to foreign countries, manila shipped to the United States was 
freed of duty. Thus foreign cordage manufacturers had to pay 
75 cents per hundred kilos more for their manila hemp than was 
paid by Americans! Similarly the British imposed differential 
export duties on tin ore mined in the Malay Peninsula, in order to 
give the tin smelters of Cornwall an advantage over their rivals in 
Perth Amboy and Brooklyn. Again, in 1920, in order to wrest from 
Germany the industry of crushing oil from the palm kernels pro- 
duced by British West Africa, the British imposed a differential 
export tax of £2 a ton on palm kernels shipped outside Britain. 
Incidentally they injured an American palm oil industry which had 
sprung up rapidly since the beginning of the war (that is, since the 
blockade had stifled the German industry). On the whole, however, 
such differential export taxes have been relatively rare, and com- 
paratively unimportant in international life. Yet to some extent 
they have contributed to the development of the imperialist attitude 
toward raw materials. 

Perhaps the most important factor in popular psychology regard- 
ing this problem is the feeling that it is perilous to be without sup- 
plies of necessary war materials in time of war. In a world where 
peace is insecure, so this train of thought runs, a nation should en- 
deavor to provide itself with adequate materials, under its own 
flag, where no foreign nation can cut them off. Those who consciously 
or unconsciously allow this idea to influence them usually forget that 
obtaining a safe supply of this or that material is quite a different 
thing from having assured supplies of ail the essential war materials. 
The United States is unusually generously endowed by nature, yet 
it is stated on good authority? that there are at least thirty materials 
essential to war, which are produced either not at all or in quite 


1U. S. Tariff Commission, Colonial Tariff Policies, pp. 590-600. 
2See Wm. Redfield, Dependent America, p. 200. 


[39] 


40 


insufficient quantities in the United States.1 Some of these—chro- 
mium and shellac, for instance—are items that are little in the public 
eye, yet vital in war industry. To obtain adequate supplies of them 
all would be a sheer impossibility for the United States, and even 
more fantastic for other countries. Real self-sufficiency in war-time 
materials is a delusion. 

The intensification of imperialist interest in raw materials, es- 
pecially since the war, has meant keen international rivalry and has 
done much to embitter international relations. If the economic 
results had been wholly satisfactory, perhaps one could pay the 
political price with less regret. But too often the economic results 
have justified neither the price paid nor the optimism with which 
many imperialist ventures have been launched. 

This fact may serve to suggest a thought that is devastating to the 
conventional imperialist view of the raw materials problem. The 
popular notion is that a nation naturally obtains the raw materials 
which its colonies produce. The actual facts, however, do not con- 
form to this rule. France owns New Caledonia, and on that island 
are found certain rare minerals, notably cobalt and nickel; but the 
cobalt of New Caledonia goes to Belgium, and two-thirds of the 
nickel goes to Belgium. The British own the Malayan colonies 
which produce more than half the world’s crude rubber, but the 
crude rubber goes mainly to the United States. The graphite of 
Madagascar goes to England, not to France. French imperialists 
are eloquent on the topic of Tunisian phosphate, but French official 
statistics show that France receives less than half of the phosphate 
and other mineral produce of Tunis. 
~ The point is that raw materials, in general, are color-blind. They 
recognize no national flag. They follow the laws of supply and 
demand, and of distance and transportation costs. They obey 
economic rather than political control. The producers have the 
familiar human tendency to sell to the highest bidder, regardless 
of nationality. Only by embargoes or by the imposition of differ- 
ential export taxes can this tendency ordinarily be overruled, and 
such methods are rarely employed. They cannot be employed 
generally. If France should forbid Tunisian mines to seli phosphate 


to foreign countries, it would probably injure the prosperity of 


1 Antimony, camphor, chromium, coffee, cork, graphite, hemp, hides, iodine, jute, 
flaxseed, manganese, manila, mica, nickel, nux vomica, opium, platinum, potassium salts, 
quicksilver, quinine, rubber, shellac, silk, sodium, nitrate, sugar, tin, tungsten, vanadium, 


wool. 
[40] 


41 


Tunis and of influential French capitalists, who would register 
effective protests. If Great Britain, instead of merely introducing 
a scheme to stabilize prices for the benefit of British Malayan rubber 
plantations, should ruin those plantations by prohibiting all export 
of rubber to the United States, the British Malayan colonies would 
become a grave problem, and the plantation owners would move 
heaven and earth, including Downing Street, to repeal the prohibi- 
tion. This point need not be overstated as an inviolable law; on 
the contrary, we know that economic ‘‘laws’’ can be overruled to 
some extent by political interference. Nevertheless, the economic 
self-interest of colonial producers is strong enough to act as a for- 
midable obstacle to any attempt on the part of an imperialist nation 
to monopolize an important raw material produced in its colonies 
but needed by foreign consumers able to pay a better price than their 
competitors in the mother-country. 

Admitting that normally raw materials will go to the highest 
bidder, and that Belgians will have to pay for Congolese products, 
and Frenchmen for Tunisian phosphate, and Englishmen for Austra- 
lian wool, just as if they were not Belgians, Frenchmen, or Britons, 
still the question may be raised whether it is not better for a coun- 
try’s foreign exchange and general prosperity, or at any rate if it 
is not more satisfactory, to pay the purchase price to one’s colonial 
fellow-countrymen rather than to foreigners. Leaving the reader 
free to answer this delicate question in accordance with his own 
sentimental predilections or theories of international exchange, 
we may simply take note of the fact that in a number of rather 
important instances the premise of this principle is false. The 
colonial producer is not necessarily a fellow-countryman. Some of 
the rubber plantations in British Malaya, for example, are owned 
by the United States Rubber Company, and large plantations in 
the Dutch East Indies are really British and American. Similarly, 
in the British mandate of Iraq the oil wells of the Turkish Petroleum 
Company will pay somewhat less than half their dividends to British 
investors, the larger share being divided among French, American, 
and Dutch interests. British capital has an important share in the 
Katanga mines of Belgian Congo. American capital is interested 
in African diamonds. British and Belgian capital own productive 
- enterprises in the Portuguese colonies. If the present process of 
vertical trust-building, by which great industries seek to extend their 


[41 ] 


42 


ownership over their raw materials, continues, we may expect to 
see the political map more and more hopelessly blurred by the 
world-wide network of investments. 

There is one more point to be considered here, and it is the pivot 
of the whole matter. The question is whether through imperialism 
it is possible and desirable to achieve national self-sufficiency in 
raw materials. Such self-sufficiency seems to be the goal toward 
which imperialist efforts tend, and—to change the metaphor—the 
rock on which imperialist arguments are builded. The answer must 
be factual rather than theoretical. Let France, with her very large 
empire, be taken as an illustration and test. Two-thirds of the 
imports of France are raw materials. But merely one-tenth of those 
raw materials comes from French colonies. The other nine-tenths 
France must import from Great Britain, the United States, Germany, 
Belgium, South America. After fifty years of active imperialism, 
France has achieved ten per cent of self-sufficiency—and ten per 
cent, of course, is not self-sufficiency at all. If a French imperialist 
heard the statement that the most important colonies of France, 
from the economic point of view, were the United States, Germany 
and Great Britain, he would doubtless gasp. But it is true. The 
chief providers of raw materials for French industry—colonies in 
that economic sense—are these three Great Powers. France does 
get over fifty per cent of her cattle, rice, manioc, fish, and ground 
nuts from her colonies; she gets between ten and fifty per cent of 
her imported wines, hides, tobacco, rubber, meat, fruits, olive oils; 
and she gets a small percentage (one to ten per cent) of her wool, 
wood, cotton, coffee, grain, cacao, lead, sugar. It has been estimated 
that if colonial supplies were fully developed, and if the price factor 
were not considered, France could depend on her colonies entirely 
for her supplies of hides, rubber, vegetable oils, wool, cotton, and 
some of the metals. But she would still remain dependent on foreign 
countries for the coal to smelt her iron ore, for zinc and tin, lead, 
manganese, oil (unless new fields are tapped), nitrate (unless it is 
made from the air), mercury, platinum, and sulphur, and other 
rather necessary materials. To annex supplies of all of these would 
require more than the imperialist genius of a Delcassé.4 

Other countries would serve equally well to illustrate the point. 


From its dependencies the United States obtains much sugar, 


1 On these French needs and resources, I have used the Annuaire statistique for 1923 and 
A. Sarraut, La Mise en valeur des colonies francaises (Paris, 1923). 


[42] 


43 


fruits, hemp, and tobacco, and some fish, gold, copper, cocoanut 
oil and minor products; but thus far political expansion has not 
materially helped to make the United States independent of Malayan 
rubber, Indian jute, Japanese silk, British tin, Canadian nickel, 
Canadian asbestos, Australian and South American wool, Indian 
and Russian manganese, Rhodesian chromite, and other important 
items on the list of imports. Japan needs raw cotton, iron, rubber, 
hides, wool, flax and hemp, wood pulp, and oil; but from her colonies 
she gets little of these, although some day Korea’s undeveloped 
mines may somewhat relieve the demand for copper, iron, and coal. 
At present Formosa supplies camphor, and some tea, sugar and coal; 
Korea exports rice, beans, cattle, and gold; Sakhalin is supposed to 
contain valuable oil and mineral resources. Holland has to import 
from foreign countries iron, coal, cotton, and various metals; whereas 
her colonies supply sugar, coffee, tea, cinchona, tobacco, rubber, 
copra, tin, and oil, enabling the Dutch to act as middlemen, rather 
than rendering Holland self-sufficient. Italy needs cotton, coal, 
iron; but colonial supplies are largely in the stage of fervent hopes. 
Belgian Congo produces, above all, copper, and also palm nuts, 
gold, ivory, palm oil, diamonds; but Belgium needs coal, various 
minerals, phosphates, cotton, and other items not supplied in quan- 
tity by Congo. Portugal needs coal, cotton, and fertilizers, but her 
colonies provide coffee, rubber, sugar, cocoanuts, and cacao. 

But what of Britain? If her empire is not self-sufficient, surely 
none can aspire to be so. A few years ago a British scholar com- 
piled statistics showing that the empire produces more than half 
the world’s supplies of a dozen or more minerals, including asbestos, 
chromite, cobalt, felspar, gold, manganese, mica, nickel, tin, tung- 
sten, molybdenum, monazite; and a substantial percentage of a 
dozen or so more.!’ In many items it is or could easily become self- 
sufficient. Yet there remain certain deficiencies, notably cotton, 
copper, and fertilizers, besides quicksilver, platinum, and sulphur, 
with which at present even this greatest of all empires does not 
seem to be able to supply itself. Even if enough cotton were pro- 
duced, by strenuous efforts, there remain the minerals, which must 
be discovered if they are to be produced. The British people cannot 
yet practice the motto, ““Keep your money in your own Empire.” 

Even for Great Britain, but infinitely more so for other empires, 

1P. Evans Lewin, The Resources of the Empire and their Development (British Empire 


Series), 1924, 
[43] 


44 


_ self-sufficiency in raw materials seems unattainable, certainly in the 
(near future.” And except in the case of Britain and the United 
' States, colonial possessions supply only a relatively small fraction 
of raw material requirements. If these are the economic facts, it is 
sheer folly for nations dependent on other Great Powers for the bulk 
of their supplies to let illusory hopes of imperial self-sufficiency in- 
terfere with the international reciprocity and good will which are 
necessary to their own prosperity. 

The whole problem can be viewed from a different angle. The 
feudal state and city state of the Middle Ages proved too small 
for the economic facts of early modern times, and were united into 
national states. The national state of yesterday found itself too 
small to include the raw materials and markets its industries craved, 
and so nations expanded into nation-empires. All the Great Powers 
of to-day are nation-empires rather than simple nations, with the 
sole exception of Germany, and Germany is a nation against her 
will. Now the nation-empire finds itself inadequate. Even its 
expanded frontiers do not include all the needed materials and mar- 
kets of industry. It is too small. The next step seems to be world- 
wide international cooperation, reciprocity, and regulation. Na- 
tions hesitate to take the step, inevitable as it may be, because 
public opinion and public sentiment cling to doctrines which were 
formulated to fit the economic facts of a generation or two genera- 
tions ago. It takes so long to convert the public to a new doctrine 
that often the doctrine is out of date before it wins general accept- 
ance. Men were slow to accept the gospel of imperialism which a 
few professors, business men, and journalists began to preach in 
the seventies and eighties of the last century, as a solution of the 
economic problems of their day; but in the end imperialism spread. 
Now it is being applied, a mid-Victorian policy in a very un-Victor- 
ian age. 

It is this survival of mid-Victorianism that mae it so difficult to 
perceive the plain facts of the present situation. We see not the 
facts but a mid-Victorian mirage. If the mirage could be cleared 
away, and sentiment laid aside for the moment, two things would 
become reasonably clear. First, that in increasing the variety and 
quantity of raw materials that may be used for the comfort of man- 
kind imperialism has performed a very genuine service. Second, 
that in so far as imperialism attempts to attain monopoly or self- 


[44] 


45 


sufficiency it is running counter both to economic facts and to the 
international good will on which peace ultimately rests. If these 
facts may be taken for granted, it is not difficult to argue, that in 
place of short-sighted antagonisms and rivalry among empires 
what is needed to-day is the gradual development, through interna- 
tional conferences, of international agreements against unfair 
practices in the control of raw materials. 


[45] 


46 


INTERNATIONAL FINANCIAL CONTROL OF RAW 
MATERIALS! 


EDWARD MEAD EARLE 
Associate Professor of History, Columbia University 


An analysis of the export and import trade of the United States 
from 1850 to the present time reveals the fact that the percentage 
of our exports consisting of raw materials and food stuffs has been 
going steadily down, and that the proportion of our exports devoted 
to manufactured articles has been going steadily up. On the other 
hand, the proportion of our import trade consisting of manufac- 
tured articles has been going steadily down and the proportion of 
our imports devoted to raw materials has been going steadily up. 
This is simply another way of saying that the United States has 
become industrialized and that the international problems of the 
United States are the problems of an industrial nation 

In the next place be it pointed out that in so far as the problem 
of raw materials has become an acute problem for the United States, 
it may be said to be a development of the period since 1910. This 
same period has been marked by the growth of American foreign in- 
vestments. These coincidental developments are not to be wondered 
at because of the obvious fact that one of the purposes of foreign 
investments is to secure certain, cheap, accessible and independently 
controlled sources of raw materials 

In a sense, therefore, the problems of the United States during 
the past two decades have been very similar to the problems of Great 
Britain throughout the nineteenth century. There is a striking 
similarity between the British cotton industry of Lancashire and the 
American rubber industry of Ohio. The British cotton industry of 
Lancashire consumes a very large proportion of the cotton crop of 
the world, none of which is grown in Lancashire or any other county 
of Great Britain. Similarly, the rubber industry of the United 
States consumes a very large proportion of the crude rubber of the 
world, none of which is produced in Ohio or any other state of the 


1 Reprinted from the Proceedings of the Academy of Political Science, Volume XII, 
Number 1, July, 1926, pp. 188-196. 
[46] 


47 


American Union. It was the American Civil War which awakened 
Great Britain to the imperious necessities of this question of supplies 
of raw cotton and which led to the organization of British cotton 
manufacturers for the purpose of developing sources of supply under 
British control. It was the Great War and the financial uncertainty 
following upon it which aroused the American government and the 
American rubber manufacturers to seek independent American sup- 
plies of crude rubber. It might also be pointed out, by way of fol- 
lowing the analogy a little farther, that the British throughout the 
nineteenth century clung rather tenaciously to a policy of splendid 
isolation and were eventually obliged to abandon it by reason of 
imperious economic necessities. The United States continues to 
cling to its policy of splendid isolation, and it would be a wise man 
indeed who would prophesy how long the policy will remain within 
the realm of practicability. 

Before 1914 there was a considerable amount of American capital 
invested abroad in sources of supply of raw materials—principally 
minerals in Latin America. Of these petroleum stood out con- 
spicuously, but other minerals in Mexico, Chile and elsewhere were 
also concerned. Then came the war, which in a very real and effec- 
tive way served to expedite the development of American foreign 
investments in sources of supply of raw materials. 

In the first place, the war itself interfered with the normal flow 
of commodities as between nations and immediately raised the ques- 
tion whether political control exercised by belligerents during war 
time might not be projected into peace time by all great industrial 
nations. The war also brought about the evils of speculation and of 
fluctuating exchange rates, which made every manufacturer, in 
varying degree, a speculator in the commodities which went into 
his finished product. Manufacturers dislike to be speculators in 
raw materials in addition to being manufacturers of the finished 
product, and so you found a tendency to evade the evils of specula- 
tion and of fluctuating exchange rates by independent control of 
sources of supply of raw materials. A very homely illustration in 
this connection was the acquisition of large Cuban sugar plantations 
by a certain popular chocolate manufacturer in the United States 
who had no concern with the international implications of such 
investments but who knew he was being gouged by sugar speculators 
and who wished to manufacture chocolate and not engage in the 


C47] 


48 


ramifications of speculation in the sugar market. The consequence 
was that purely wartime conditions tended to accentuate the de- 
velopment of American investments in raw materials. 

Simultaneously came a consciousness on the part of the American 
government that there was a very close correlation between indus- 
trial welfare and national defense—a fact which no government can 
afford to ignore under present conditions. The consequence is that 
not only during the war but after the war there has been a conscious 
policy on the part of the government of the United States—and I 
am concerned principally with that government for the moment; 
most of us are kept so thoroughly alert by the public press and by 
our own government officials to the sins of other nations in this 
respect that they need not be emphasized here—to urge the invest- 
ment of American capital in independent sources of supply of raw 
materials, purely because of the national interests which are sup- 
posed to be involved. 

This has not been a partisan matter by any means. During the 
last years of Mr. Wilson’s administration the government at Wash- 
ington was very actively concerned with the question of American 
supplies of raw materials. It was under Mr. Wilson’s administration 
that the Anglo-American controversy regarding petroleum in the 
Near East reached fever heat. 

The Democratic Party platform of 1920 contained the following 


statement: 

The Democratic Party recognizes the importance of the acquisi- 
tion by Americans of additional sources of supply of petroleum and 
other minerals and declares that such acquisition both at home and 
abroad should be fostered and encouraged. We urge such action, 
legislative and executive, as may secure to American citizens the 
same rights in the acquirement of mining rights in foreign countries 
as are enjoyed by the citizens or subjects of any other nation. 


The Democratic party was defeated, as you know, in 1920, but 
the Republican party has executed that plank of the Democratic 
platform as faithfully as the Democrats could have executed it 
themselves. 

It is with the name of Mr. Hoover that this policy of the active 
promotion of American foreign investments in raw materials is 
principally associated. In 1921 Mr. Hoover is reported to have 
said to a gathering of American oil producers in his office at Wash- 
ington: ‘‘Unless our nationals reenforce and increase their holdings 


[48 J 


49 


abroad, we shall be dependent upon other nations for the supply 
of this vital commodity (petroleum) within a measurable number 
of years. The truth of the matter is that other countries have con- 
served their oil at the expense of our own. We must go into foreign 
fields and in a big way.’ 

In 1922 Mr. Hoover was responsible for obtaining from Congress 
an appropriation of five hundred million dollars to determine to 
what extent American interests were being squeezed by foreign 
monopoly. In 1924 Mr. Hoover urged upon Congress the desirability 
of permitting American manufacturers to enter into combinations, 
anti-trust legislation to the contrary notwithstanding, for the pur- 
chase of raw materials from abroad. Then came Mr. Hoover’s 
rubber outcry of 1925-1926,! with which you are familiar. But it 
was not alone Mr. Hoover who was thus concerned. An attempt 
was made to have the Tax Bill of 1926 contain a provision exempting 
income derived from American investments abroad. The State 
Department has been supervising foreign investments with a view 
to considering the national interests involved. Presumably Ameri- 
can investors could have investments diverted to channels which, 
in the opinion of the Department of State, might be more important 
from the point of view of the national interest. 

In spite of the conditions of war time, in spite of the financial 
conditions surviving war time, in spite of the active program on 
behalf of foreign investments which has been carried on by govern- 
mental and other agencies, only a comparatively small proportion 
of American foreign investments at the present time is to be found 
in American-controlled supplies of raw materials. That is largely 
because of the heavy demands upon American capital which come 
from other sources and which are much more attractive to the 
investor, as, for example, the huge reconstruction loans in Europe. 
However, the proportion of certain vital raw materials which are 
now in the hands of American investors has been growing larger. 
For example, the nitrate supply in Chile is now about fifteen per 
cent in the hands of American capital as compared with only about 
two per cent before the war, and American capital is still buying 
its way into Chilean nitrate fields. The same thing is true of tin in 
Bolivia, vanadium in Peru, and sugar in Cuba. 


The question as to whether the future will bring increased invest- 


1 Herbert C. Hoover, Statement on Raw Materials, Trade Information Bulletin, No. 
385, Department of Commerce, Washington, D. C., January, 1926. 


[49] 


50 


ments in sources of supply of raw materials is a difficult one to 
answer. It consists of prophecy which at the best must be under- 
‘taken with very grave reservations. There are those who believe 
that the falling demand in Europe for reconstruction loans and the 
increased accumulation of “‘surplus funds” in the United States 
by reason of superior industrial efficiency will compel capital to 
find its way in increasing degree into sources of supply of raw mate- 
rials. If the governmental policy of encouraging such investments 
continues, there is perhaps reason to believe that such will be the 
case. On the other hand, there is the fact that American business 
men are exceedingly hard-headed. In some cases they do not con- 
ceive the national interests to be quite their own interests. They 
view independent sources of rubber supply, for example, purely 
from the point of view of the return they may expect upon their 
investment, not from the standpoint of control of such materials 
during time of war. 

There is, however, something to be said of another aspect of the 
question which is not so prophetic and not so problematical, and 
that is this: If it be true in the future that increasing amounts 
of American capital will find their way into sources of supply of 
raw materials controlled largely or exclusively by Americans, it 
will certainly be true that such investments will meet with powerful 
resistance from a variety of sources. In the first place you will 
have politically weak countries: like Mexico which, fearing the 
international complications of foreign investments within their 
borders, will proceed to adopt legislation hostile to such foreign 
investments. Indeed, as far as Mexico is concerned, such legisla- 
tion is no longer a probability; it isa fact. And Mexican nationalism 
will be heightened in proportion as American capital with govern- 
mental support finds its way into Mexico. 

Politically developed countries, like Canada, fearing the depletion 
of their natural resources by American investors, will proceed to 
adopt legislation in the form of export taxes or embargoes upon the 
shipment of such raw materials outside their own borders. Indeed, 
as far as Canada is concerned, that is not a supposition; it is already 
a fact. If such a policy be pursued by Canada and other nations, 
it will involve not the importation of raw materials into the United 
States from abroad, but the migration of American industry from 
the United States to the foreign countries concerned. 


[50] 


5i 


In the third place there will be resistance from highly industrialized 
nations like Great Britain with colonial empires from which they 
wish to draw their supplies of raw materials. Such resistance will 
not be without justification. The British may argue that if it is 
legitimate for us to keep British goods out of our market by a pro- 
tective tariff, it is proper to keep American capital out of their 
territories by any legislation which they may see fit to adopt. And 
if they do adopt such legislation it will become increasingly difficult 
for American capital invested within the British colonies to carry 
on its work successfully. 

Even in those areas which are under American political control 
powerful resistance will be felt. It was discovered, for example, by 
American rubber manufacturers that the proposal to turn the 
Philippines into a source of supply of rubber was one which the 
Filipinos were not prepared to accept. American investments in 
rubber plantations obviously would constitute a reason why the 
Philippines should not be released from American economic and 
political control. In addition, such rubber plantations would involve 
‘breaking down, first, land legislation designed to protect the Fili- 


'pinos from foreign ownership and, second, labor legislation designed 
‘to protect the Filipinos from coolie labor. 

This will leave to the United States as a free field only those areas 
like Liberia, which can forcibly be brought under American control 
lif necessary. This, after all, is the problem of imperialism. 

How are you going to approach this problem of raw materials if 
it cannot be successfully approached on the lines which have been 
suggested? It is trite to say that this is an economic rather than a 
political problem. But it is true nevertheless. In proportion as 
‘this is made a political rather than an economic problem it becomes 
impossible of solution. The policy which the great powers have 
been pursuing up to the present time is not merely a problem of 
imperialism, narrowly defined, it is a problem of mercantilism. It 
is a needless complication of international politics which distributes 
around the world a considerable amount of political dynamite likely 
to go off at unexpected times and with disastrous results. 

An experiment of some interest is the development of interna- 
ional consortiums for the exploitation of raw materials. There has 
just recently been consummated one of these international organiza- 
ions under the name of the Turkish Petroleum Company. After 


[51] 


52 


deliberations extending over several years the Turkish Petroleum 
Company is now definitely established. It was organized as a Brit. 
ish corporation but is hereafter to be an international corporatior 
in which British, American, French and Dutch capitalists are tc 
be interested. Twenty-five per cent of the capital of this corpora- 
tion is to be in the hands of the Anglo-Persian Oil Company; twenty- 
five per cent in the Royal Dutch Oil combine; twenty-five per cent 
in the hands of sixty-seven French companies operating as a unit: 
and twenty-five per cent in the hands of six large American corpora- 
tions. This international consortium will take the oil out of Iraq 
and deliver crude oil to the Mediterranean seaboard, where it will 
be taken up by the respective companies and refined under their 
own auspices. It is not an exaggeration to say that an international 
consortium such as this will operate on behalf of political stability 
in the Near East and will tend to make the American government 
less critical toward the British administration in Iraq than hereto- 
fore. The settlement of this controversy will doubtless bury the 
bogy of a secret British or Anglo-French conspiracy to keep Ameri- 
can oil prospectors out of the Near East. 

In a sense, of course, the problem of raw materials is not peculiarly 
an international problem. It is a domestic problem as well. Every 
manufacturer in the United States is concerned with a cheap, 
secure and a steady supply of raw materials. Occasionally a manu 
facturer, charging discrimination, is obliged to build up his own in 
dependent sources of supply of raw materials. Mr. Ford is, of cours 
an outstanding illustration; he has built up an industry which i 
substantially self-sufficient. 

But the domestic problem of raw materials is never a proble 
involving civil war. It is controlled by laws which define unfai 
competition. There is adequate machinery to enforce those law: 
and to inflict punishment upon those who flagrantly violate them 
There is, of course, a striking difference between the domestic prob 
lems of raw materials and the international problem of raw ma 
terials. Whereas the domestic problem is defined by well-establishe 
ethical and legal standards, the international problem and its polit 
ical implications, without such ethical and legal standards, are dis 
tinguished by a total absence of agreement and law. In the domesti 
sphere, to be sure, you have frequent departures from the standard 
of fair competition, but you do not have to resort to economic an 


[52] 


53 


political barbarism in the solution of difficulties or in the punish- 
ment of the offender. 

Mr. Culbertson, in his book on International Economic Policies, 
has suggested that it is quite within the realm of possibility to develop 
a code of international economic practice which will define unfair 
competition; that ultimately it will be quite possible to establish 
international judicial machinery through which manufacturers, 
regardless of nationality, may appear as individuals and not as 
representatives of a particular country for the purpose of enforcing 
their rights and for the purpose of protesting against discriminatory 
treatment. 

To all of this objection will be raised that it is very well in time 
of peace but that all standards will break down in time of war. 
Such an objection is an example of that reasoning in a vicious circle 
which is a principal obstacle to international progress. It fails to 
take into account the fact that competitive striving for sources 
of raw materials is, in turn, one of the prolific causes of war. So 
you come back to the fundamental proposition, that in so far as 
we predicate international policies upon the war system we may as 
well reconcile ourselves from the start to self-inflicted defeat. Unless 
we are courageous enough to strike out upon the supposition that 
law can be substituted for the war system we certainly shall get 
nowhere. 


[53 ] 


54 


POLITICAL CONTROL OF RAW MATERIALS IN 
WAR AND PEACE}! 


L. L. SUMMERS 


Consulting Engineer; formerly Technical Adviser, American Commission 
to Negotiate Peace; Technical Adviser, War Industries Board, 
and Chairman, War Industries Board in Europe. 


We inherited a maternal grandmother—very wealthy—and the 
grandchildren were very daring. They had inherited a great deal 
of grandmother’s wealth. Some of those grandchildren belonged 
to a very hardy race, the Scotch race. The Scotchman is the greatest 
colonizer the world has ever seen. The principal factor about the 
Scotchman was that, while he was loyal to Scotland and to the 
British flag, he went into every country of the world and he didn’t. 
try to make Scotchmen out of the natives. He married a native 
woman; nothing in the society that he went into disturbed him in 
the least. He proceeded along his own way and modified, just as 
he wanted, the things he wanted, and left everything else alone. 

A most conspicuous illustration of that is the Hudson’s Bay 
Company of Canada. You did not have Indian warfare in the 
Canadian Northwest, because the Scotchman was there. He treated 
the Indians honestly and won their confidence. We had our wild 
western situation with its desperadoes, its bandits and its train 
robbers. Why did not these men, after perpetrating some crime, 
cross the border and go into the great wilderness of the Northwest? 
A man could not enter that wilderness without his movements being 
known within forty-eight hours. If the Northwest police wanted 
a man they sent out a call for him—every guide, every trapper was 
a part of that system. It is a most astonishing example of policing 
a wilderness with a small number of very efficient men. It was 
a case of pathological nationalism. It was utilized in another 
country. It is an outstanding example of peaceful penetration. 

The subject assigned me is ‘ Political Control of Raw Materials 
in War and Peace.’”’ In peace there is a greater production than 
can be conveniently utilized, while in war you are unable to meet 


1 Reprinted from the Proceedings of the Academy of Political Science, Volume XII, 
Number 1, July, 1926, pp. 197-203. Informal address delivered at Round Table No. 9. 


[54] 


59 


the demand for those same materials. That makes a very funda- 
mental difference. 

We have talked much of government in business. The war de- 
veloped some very peculiar sociological tendencies. The man power 
of the nations at war was assembled. Those who went to industrial 
works received large wages and indirectly got their money from the 
government. A large part of the population was represented in 
some war activity involving a remittance from the government 
treasury. This support developed unconsciously a form of paternal- 
ism, a reliance on the central government and a tendency to appeal 
to that government for every kind of domestic difficulty. Unfortu- 
nately the political elements in a nation are usually not familiar 
with the practical limitations of paternalism. We face therefore 
an era of subsidy-seeking and some peculiar interpretations of 
fundamental economics. 

The statement I made last night [see page 21] in regard to the 
price of wheat was challenged. 

In general the peace-time movement of raw materials involves 
some interesting phases of the law of supply and demand. Take 
cotton for instance. Galveston is the great cotton port of the 
world. The exports from Galveston exceeded those from New York, 
and for the past years about five hundred and fifty to six hundred 
millions of dollars in cotton annually left the port of Galveston for 
foreign ports. 

Manchester and Bremen were the two great central buyers’ 
markets before the war. The cotton quotations of Liverpool re- 
flected the world prices, and estimates were made of the amount of 

_the cotton crop, the acreage planted, the condition of the crop and 
hence the possible supply for the year. Probable consumption was 
also estimated and endeavors were made to study what the future 
prices—technically termed ‘‘futures’—would be. It is unwise for 
a great consumer in Manchester or a group of consumers to allow 

fluctuating prices in a world market to entirely determine the cost 
to them, though they realize the crop of the year and the estimated 
market for the year will govern the price. 

Let us see what industry does to step in and modify, as far as 
possible, the law of supply and demand. Mr. A’s bank at Galveston 
_—he was the agent of the Manchester buyers—would start the early 
spring planting season by asking for a remittance in advance from 


[55] 


56 


Manchester. The local banks through Texas, Oklahoma, and the 
great cotton region would receive deposits from Mr. A. The local 
bank would go out to the cotton grower, the small grower, and in 
some cases to the local storekeeper, and say, “Jim, you advance 
money to these fellows that we bought from last year. Here is a 
list of fellows; we know they are reliable. If they want any money 
or if they want stores and supplies, furnish them with what they need 
and take their notes and charge it against the crop.” 

Consequently, Manchester owned cotton in the ground before 
it was grown. The price was agreed on in advance so that the 
consumer was independent of the eventual figures of supply and 
demand and of the world quotations. He was buying his cotton 
below the market price and at a fixed price. | 

You can see, therefore, that there are ways of tempering and — 
regulating supply and demand. Those are actual expedients that — 
are resorted to. The rigid economists cannot see details; they are 
gradual developments. They are not planned by any one man. 
They are the outgrowth of necessity. : 

That method of purchasing would indieme that America had a> 
chance to protest against British capital coming in here and control- 
ling a portion of our cotton crop, over which we had nosay. Probably — 
if any one had thought that it was possible for a foreign power to 
come in here and control some of our planting and control what | 
should be done, a hullabaloo would have been raised. But the system ~ 
created no disturbance. It was a godsend to everybody. If some | 
of these growers had gone to the local bank and asked to borrow | 
money, they would have been told, “Your credit is no good,” 
or, “‘We will charge you twenty-five per cent interest and take a 
mortgage on everything you have.’’ They hada gold mine! Their 
beneficent grandmother was including them in her remittances. 
That was a very charitable thing to do for the poor planter. It was 
a very effective thing to do for the Manchester and the Bremen | 
cotton manufacturers; and yet it would have met with very serious | 
objection had political Washington thought of it. 

We used to get our rubber from Brazil. The Para rubber carried | 
the highest quotation in the rubber market. The native went out | 
into the forests, into the jungle, on his own account and located his > 
rubber trees, tapped them, collected his sap, evaporated it and car- 
ried it to the nearest trading post, where he negotiated. They would — 


[56] 


57 


reduce the price of his rubber because of impurities—mud and bark 
and various impurities—and the post trader would bargain in that 
way. Then the products would be assembled at shipping ports and 
go down the river. 

Some of the natives would be disgusted and decide it was easier 
to lie around in the sunshine than it was to go off into the jungle. 
Moreover, when they got prosperous they decided they would not 
go out because they had made enough. It occurred to some wise 
men that that was not an infallible supply. It was courting disaster. 
At that time rubber and hard rubber were used in toilet articles 
and instruments, but the greatest use was for the insulation of elec- 
tric wires and cables. As that developed, Para rubber sometimes 
reached the price of four dollars a pound. But we did not hear of 
any international agitation. 

Then there came a great industry—the making of automobile 
tires. There was a question as to whether horse-drawn carriages 
would ever be supplanted by horseless carriages. But the industry 
grew and grew and great manufacturers decided to embark in it. 

The most singular tHing is that no industry in the world with 
which I am familiar would have invested hundreds of millions, even 
billions of dollars, and not have provided itself with an adequate 
supply of raw materials. One of the first things an engineer does 
in investigating an industry is to study the natural advantages and 
see whether you have everything that is required—where you are 
going to secure it, how you are going to transport it, what the pre- 
sent rates are, and what the chances are of the rates changing. But 
here was an industry that just kept growing, and growing, seemingly 
indifferent. The automobile industry could not possibly have been 
developed except for the foresight, the originality and daring of a 
lone Britisher off there in the jungles of Brazil. 

He said, ‘‘Why this is’ pefectly hopeless! They are laying the 
Atlantic cables and they used up everything we took in last year. 
If the natives don’t go out the supply will be so uncertain we won't 
be able to provide it again.’’ So he began to assemble the seed of 

_ the rubber plant of Brazil. He knew if the government were informed 
that there might be a question as to whether that seed would ever 
leave Brazil. But he succeeded in getting his precious seed to Eng- 
land, and in the botanical garden of London the rubber tree of 
Brazil blossomed and they took some of the seed to Holland for the 


[57] 


58 


botanical gardens there. One day it dawned on some one to take 
some of this seed from London and plant it in Malaya. And there 
_ started that rubber industry. 

It takes six or seven years to develop a rubber tree. Probably in 
five years you may get about a ton of rubber to fourteen or fifteen 
acres. After maturity that is reduced to something like a ton of 
rubber to four or five acres. 

Remember that in this daring move Americans took no part. 

The automobile industry had a sudden collapse in 1921. The 
rubber plantations of the Malay Straits recognized that a great 
slump had come and the British Government planned the restriction 
known as the Stevenson Act. But they made an offer to our manu- 
facturers on a five-year contract, hoping that would average up and 
enable them to keep the cream of their plantations in production, 
because plantations return to the jungle very rapidly. We declined 
that offer for the simple reason that our shrewd traders said: ‘‘ Rub- 
ber. is falling and falling rapidly. We can buy all the rubber we 
want.” 

But the situatidn continued only for about two or three years. 
The hugh demand for rubber, when the automobile industry came 
back, caused a large advance in price, and the international specu- 
lator, always present, seized the opportunity and that created the 
international situation. 

Turning to war control of raw materials you are faced with some 
peculiar problems. From an economic point of view, some of the 
situations involving the purchasing power of gold and the necessity 
of resorting to barter were particularly interesting. 

On the advice of Gustav Cassel, the great economist of Stockholm, 
the Swedish Government took a very unusual stand. They embar- 
goed the importation of gold. They wanted no more gold in the 
country because it became a basis for expanding credits. The 
American dollar was worth only fifty cents in Sweden, Holland 
and Spain, and for anything you purchased you just paid double. 
It was impracticable to deal with these neutrals on. this basis. It 
was decided that the simplest thing to do would be to petition the 
Swedish Government for a loan, as they had a surplus of funds. 
So the United States Government borrowed five million dollars 
from the Government of Sweden for five years, payable in gold. 
Sweden seemed to ask no questions. They supposed we wanted a 


[58] 


39 


loan because we needed money—everybody else did—but we did 
not wish the money for that purpose exactly. It was deposited in 
the Bank of Sweden and everything purchased in Sweden was paid 
with a Swedish check at par. 

We wanted mules from Spain. Pershing needed some forty 
thousand mules for artillery. The Germans were very strong in 
Spain and the small Spanish farmer who owned the mules did not 
want to part with them. The embassy and the military attachés 
found it impossible to deal with the Spanish farmer. We had heard 
rumors that the olive orchards were suffering from lack of fertilizer. 
They needed some nitrate and we controlled the nitrates. The 
Spanish orchards were gradually fading away and so our emissaries 
entered Spain and traded sulphate of ammonia for Spanish mules, 
and those mules started moving over to the French front. Gold 
was useless but sulphate of ammonia was a crown jewel. 

In dealing with South America a number of years ago, we had a 
very shrewd sales manager. He took from Cuba a Spanish-American 
of charming presence and of good birth and education, and after a 
number of conferences he said he would like to spend three or four 
months with letters of introduction in this territory that this Amer- 
ican corporation was to enter. So he went down and with his letters 
of introduction visited through the country. He went in and 
visited as a guest. Then he sent in a request for the best salesman 
we had who could speak Spanish. He took this salesman with him 
and returned to the houses where he had been a guest and introduced 
his friend who was representing an American corporation. The 
gentleman who first was a guest at the house was, you see, an em- 
ployee of the corporation. His method of approaching these Span- 
iards was to meet them socially and not on a matter of business. 
He could guarantee the friend he was introducing—he would per- 
sonally guarantee him. The friend was very solicitous as to what 
_these people wanted and consequently the orders came to this 
country for so many baby carriages and baby cradles, and so on, 
that the purchasing department of the corporation had to open a 
| new department to deal with domestic articles in order to sell ma- 
chinery in South America. I doubt if a government, looking only 
_at the sale of machinery, would ever realize that baby carriages and 
| comforters and family clocks and articles of that sort might be more 
effective than gold in some cases. 


[59 ] 


60 


Industry readily adopts systems of bartering, recognizing that 
gold is not the only medium of exchange. It is less easy for govern- 
ments to barter, and, in general, government control, whether in 
war or peace, lacks the flexibility and adaptability to which industrial 
control is accustomed. 


[60 ] 


61 


BIBLIOGRAPHY 


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Chap. XI in The League of Nations, by Stephen P. Duggan, Atlantic 
Monthly Press, Boston, 1919, pp. 201-217. 

Brookings, Robert S., ‘“‘The Relation of Raw Materials to Peace and 
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XII, No. 1, New York, July, 1926, pp. 113-115. 

halmers, Henry, ‘‘Trade Barriers between European Countries,’’ Cur- 

| rent History, April, 1926, pp. 62-66. 

Chisholm, George G., Handbook on Commercial Geography (tenth edition), 
Longmans, Green and Co., New York, 1925, 825 pp. 

WCrude Rubber, Coffee, etc., Hearings before the Committee on Inter-state and 

Foreign Commerce, House of Representatives, 69th Congress, Ist 
Session, on House Resolution 59 (1926). 

Culbertson, William S. et al., ““Raw Materials and Foodstuffs in the 
Commercial Policies of Nations,’’ Annals of the American Academy 
of Political and Social Sciences, Vol. CXII, Philadelphia, March, 1924. 
Culbertson, William S., ‘‘Raw Materials and Fuel,” in International 
Economic Policies, D. Appleton and Company, New York, 1925, pp. 

304-339- 

unningham, J. C., The Products of Empire, the Clarendon Press, Oxford, 
1921. 

Curtis, Harry A., “Fertilizers: The World Supply,” Foreign Affairs, New 

York, March, 1924, pp. 436-445. 

Davenport, E. H.: Cooke, S. R., The Oil Trusts and Anglo-American 

Relations, Macmillan Company, New York, 1924. 

jEarle, Edward M., ‘‘Raw Materials in Peace and War,” Journal of Amer- 

ican Bankers Association, September, 1923. 

\Earle, Edward M., ‘‘The Turkish Petroleum Company,”’ Political Science 
Quarterly, Academy of Political Science, Columbia University, New 
York, June, 1924, pp. 265-277. 

onomic Union of Europe, The, Vol. 10, Nos. 7 and 8, Monthly Bulletin 
of the Society to Eliminate Economic Causes of War, Wellesley, 
Mass., September and October, 1926. 


\Enquéte sur la Production, volumes for 1921, 1922, 1923, and 1924, Inter- 
national Labour Office, Geneva. 


‘Fischer, Louis, Oil Imperialism, International Publishers, New York, 1926. 


[6r] 


62 


Frank, Glenn, ‘‘The League of Nations and Economic Internationalism,’ 
Chap. X in The League of Nations, by Stephen P. Duggan, Atlantic 
Monthly Press, Boston, 1919, pp. 184-200. 

Fraser, Herbert F., Foreign Trade and World Politics, Alfred A. Knopf 
1926, 346 pp. 

Gini, C., Report on the Problem of Raw Materials and Foodstuffs, League o 
Nations, Geneva, 1922. 

Great Britain, Imperial Institute, British Cotton Cultivation, Darling 
London, 1908. 

Great Britain, Imperial Institute, Petroleum, Murray, London, 1921. 

Great Britain, Imperial Mineral Resources Bureau, Iron Ore, H. M. Sta 
tionery Office, London, 1922. 

Great Britain, Imperial Mineral Resources Bureau, The Mineral Industr: 
of the British Empire and Foreign Countries. Statistical Summary 
1920-1922, London, 1924. 

Great Britain, Imperial Mineral Resources Bureau, Petroleum and Allies 
Products, London, 1924. 

Hoover, Herbert C., Statement on Raw Materials, Trade Informatior 
Bulletin, No. 385, Department of Commerce, Washington, D. C. 
January, 1926. 

Leith, ‘C. K., ‘‘The Mineral Resources of the Far East,” Foreign Affairs 
New York, April, 1926, pp. 433-442. ; 
Leith, C. K., ‘‘The Political Control of Mineral Resources,” Foreigi 

Affairs, New York, July, 1925, pp. 541-555. 

Leith, C. K., ‘‘The World Iron and Steel Situation,” Foreign Affairs, Nev 
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Lewin, Evans, The Resources of The Empire (British) and Their Develop 
ment, Collins, London, 1924, 364 pp. 

Manchester Guardian Commercial, supplement ‘European Reconstruc 
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“Markets of the United States,’’ Annals of the American Academy o 
Political and Social Sciences, Vol. CXVII, No. 216, Philadelphia 
September, 1926. 

McCloskey, H. D.: Burchard, E. F., Our Mineral Supplies, United State 
Geological Survey, Washington, 1919. 

Moon, Parker T., Imperialism and World Politics, Macmillan Company 
New York, 1926, pp. 542-558. 

Moon, Parker T., Syllabus on International Relations, Macmillan Co 
pany, New York, 1925, pp. 169-191. 


[62 ] 


63 


Oulahan, Richard V., ‘‘Hoover Warns World of Trade Wars,’’ New York 
Times, Section 8, January 10, 1926, p. I. 

Redfield, William, Dependent America, Houghton Mifflin Company, 
Boston, 1926, 278 pp. 

Smith, G. O., Strategy of Minerals, D. Appleton and Co., New York, 1919. 

Spurr, Josiah Edward, Political and Commercial Geology and the World's 
Mineral Resources, McGraw-Hill Company, New York, 1920. 

Spurr, Josiah Edward, ‘‘Steel-Making Minerals,’’ Foreign Affairs, Vol. 4, 
Special Supplement No. 3, New York, April, 1926, pp. 601-612. 

Taylor, Alonzo E., ‘‘World Food Resources,”’ Foreign Affairs, New York, 
October, 1926, pp. 18-32. 

Todd, John A., ‘‘The World’s Crisis in Cotton,” Foreign Affairs, New 
York, December, 1923, pp. 232-243. 

Tower, Walter S., “The Coal Question,’ Foreign Affairs, New York, 
September, 1923, pp. 100-116. 

Trameyre, Pierre de la, The World Struggle for Oil, Alfred A. Knopf, 
New York, 1924. 

Viallate, Achille, “‘Exportation of Capital,’ Chap. III in Economic Im- 
perialism, Macmillan Company, New York, 1923, pp. 55-63. 

Viner, Jacob, “‘ National Monopolies of Raw Materials,’’ Foreign Affairs, 
New York, Vol. 4, Special Supplement No. 3, April, 1926, pp. 585-600. 

Whitford, Harry N., ‘‘The Crude Rubber Supply,” Foreign Affairs, New 
York, June, 1924, pp. 613-621. 

Wright, Arnold, The Romance of Colonisation, Melrose, New York and 
London, 1923. 


NOTE 


'__ “‘Appeal for Lowered Tariff Barriers Made by Bankers and Industrialists of Sixteen 
Nations,’’ New York Times, October 20, 1926. 

“International Tariff Problem,’ Information Service, Vol. II, No. 18, Foreign Policy 
Association, New York, November ro, 1926. (Contains text of manifesto.) 

Andrew W. Mellon, Secretary of the Treasury, ‘‘Statement Regarding the Appeal for 
Lowered Tariff Barriers Made by Bankers and Industrialists,’’ New York Times, October 
/25,10926. Also obtainable from the Treasury Department, Washington, D. C. 


[63 ] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, 1907 to No. 199, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
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most recent publications are listed below. A complete list will be sent upon 
aeecarion to International Conciliation, 405 West 117th Street, New York 

ity. 


2it. 


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215. 


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220. 


221. 


222. 


223. 


224. 


225. 


226. 


Divlematic Relations between the United States and Japan, 1908-1924. 

une, 1925. 

European Security: Address by Dr. Edward BeneS, Czechoslovak Foreign 
Minister, at Prague, April 1, 1925; Address by Mr. Austen Chamber- 
lain, British Foreign Minister, at Geneva, March 12, 1925; Reply to 
Mr. Chamberlain’s Address by Mr. J. Ramsay MacDonald, Former 
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. The United States and the System of Mandates, by Walter Russell Bat- 


sell, M.A., Director of the Reference Service on International Affairs of 
the American Library in Paris. Information Regarding the Mandate 
System. 

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The Advisory Opinions of the Permanent Court of International Justice 
by Manley O. Hudson, Bemis Professor of International Law, Har- 
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The Trend of Economic Restoration since the Dawes Reparation Settle- 
ment, by E. G. Burland, Member of the Staff of the American Section 
of the International Chamber of Commerce. 

December, 1925. 

Final Protocol of the Locarno Conference, 1925, and Treaties between 
France and Poland and France and Czechoslovakia. 

January, 1926. 

Peasant Conditions in Russia, 1925, by Jean Efremoff, Former Minister 
of Justice in the Provisional Government of Russia. 

February, 1926. 

The Institute of Pacific Relations, by J. Merle Davis, General Secretary. 

March, 1926. 

The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. ; 

April, 1926. 

Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 
berlain. 

May, 1926. F 

Treaty-Making Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 

June, 1926. 

The Problem of Minorities. Articles by Louis Eisenmann, William E. 
Rappard, H. Wilson Harris and Raymond Leslie Buell. 

September, 1926. 

The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 
in the Government of Italy. Recent Legislation in Italy. 

October, 1926. 

An Alternative Use of Force: When the Earth Trembled, by Richard 
J. Walsh; The Moral Equivalent of War, by William James. 

November, 1926. 

Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 
Pritchett, Trustee of the Carnegie Endowment for International Peace. 

December, 1926. 

Raw Materials and Their Effect upon International Relations, Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

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CHINESE POLITICS AND FOREIGN POWERS 


BY 
Haroip S. QUIGLEY 


SYLLABUS ON RECENT CHINESE 
POLITICS AND DIPLOMACY 


FEBRUARY, 1927 
No. 227 


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} 
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CONTENTS 


Page 
IPRUSIACHybe tle 2). RARE ent hen nbn oN ON 
CHINESE POLITICAL A AND ForEIGn. PowERs SIN ote Vaasa O° 
TAIPASST 3! 9, TSH AVA aoe ot ee oe a RE SO EOS CAL (3° 
TRTSRT., TE ABS ie nat As ce em ED a Pea OE TE 9 
RicceEERE MIA MPM ewe ei! ANS, Re Ayaan hime 
RUPMUNEEDO ESTATES). Misys qaviet et Gl kan ak do edo dh) Ol IS 
ISON GIAU SLOG ANSE eH YM aeNi ite y ari tous ssbikiad |, 212 UM e 8) ANS Oe AY 
RECENT EVENTS 
Conrstitutionalband) Politically ne! ey Ge) a 2 8 
Diplomatic }s)./\. eg 
SYLLABUS ON RECENT CHINESE. Ponies AND Dierowsey 
EXTRATERRITORIALITY AND CHINESE LAW ........ 34 
POLITICAL AND CONSTITUTIONAL DEVELOPMENT ...... 36 
ECONOMIC CONDITIONS AND PROBLEMS ......... . 38 
INDERNATIONAL, RELATIONS OF CHINA) 0)... /5 0) 4...) go 
REFERENCES FOR THE GENERAL READER .. . Aaa 


CHART SHOWING THE DEVELOPMENT OF Saas Cone 
faces page 46 


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67 


PREFACE 


A review of the complex situation that exists in China, especially 
as it relates to foreign affairs, is most welcome while the Report of 
the Commission on Extraterritoriality is still being discussed and 
when every day brings news of military conflict in China. To pre- 
sent such a review, Professor Harold S. Quigley, of the University 
of Minnesota, has kindly consented to extend for publication in its 
present form the following admirable article, already published in 
part both in the United States and in England. He has also provided 
a Syllabus on Recent Chinese Politics and Diplomacy which will be 
found at the end of this document. Farther references have also been 
given as to sources of information on Chinese affairs. Professor 
Quigley speaks with authority as a student of Far Eastern Politics 
and as a former member of the faculty of the Tsing Hua College at 
Peking. It is believed that this document will prove to be both in- 
teresting and informing and also serve as a permanent source of 
reference. 

NicHoLAS Murray BUTLER 


New York, January 5, 1927. 


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69 


CHINESE POLITICS AND FOREIGN POWERS! 


BY HAROLD S., QUIGLEY 
Professor of Political Science, University of Minnesota 


What has not been true since. Tao Kuang is true today—that the 
most important factor in the Far Eastern situation is China. In 
spite of her continued weakness as a military power, of her disunity 
and her lack of political morale, China today is exhibiting a foreign 
policy of her own and her policy is receiving attention on its merits. 
That does not mean necessarily that her policy will succeed in part 
or entire, any more than it would mean such a result for any other 
country which exhibited a policy. But it is an important step for 
China that her policies should be receiving equal consideration with 
those of other countries. 

The question of what influences havé been effective in bringing 
about this changed status is one of the highest interest. Perhaps 
it is merely a commonplace to give the most prominent position to 
the spread of education and the consequent growth of national con- 
sciousness and national feeling. This development has had two re- 
sults: it has provided trained diplomats and it has stimulated a pub- 
lic opinion to support their moves. Not that China did not have 
trained diplomats in earlier days; but she required men who knew 
foreign countries and foreign languages. Such men she obtained and 
to them she owes a heavy debt for their suave presentation of facts, 
near-facts and plausibilities. With disorder verging upon anarchy at 
home these men have so conducted themselves as to win the good- 
will of foreign peoples and have so presented the issues affecting their 
country as to magnify China’s efforts at reform and minimize the 
work of her agents of destruction. Wherein they have simply fol- 
lowed precedent, for it has ever been a poor diplomat who would 
expose his country to the laughter of other peoples. And, force 
aside, what an enviable position as fencers they have enjoyed and 
what satisfaction they must have felt while delicately referring to 
_ this, that, and the other depredation and indignity that the govern- 
ment and countrymen of their hosts had put upon them. In most 


1Printed in part in Current History, September, 1926 and in the Contemporary Review 
(London), November, 1926. c 1 
9 


7O 


cases of the sort the retort courteous might have been in order, but 
in China’s case the impositions have been unilateral. 

Some would say that there is no such thing as public opinion in 
China. But what is public opinion in any country? It is not like 
a system of water-mains or electricity, out of which water or light 
may be obtained by turning a spigot or a button. Public opinion 
is not always sentient on current issues, because it is never fully 
informed and because it is never sufficiently interested. It is more 
like an old-fashioned automobile that has to be cranked, possibly 
primed, to be gotten to work. The leaders of opinion must do the 
cranking in America and in Europe as well as in China. And it may 
be doubted whether the Western populace is better prepared to 
react sanely to propaganda than the Chinese. But granted that 
its superior education is a better basis for judgment than Chinese 
traditions, the fact remains that popular judgments are worked up in 
the West quite as obviously as they are in the East. 

The other of the principal influences working in China’s favor has 
been the development of economic imperialism. The open door and 
the integrity of China policies embody this development and they 
have. been effective just so far as they have expressed the interests 
of their exponents. Where they have not functioned properly it 
has been because other policies have overcome them in the presence 
of interests amounting to necessities both in their opponents and 
their supporters. Time has worked in China's favor in the applica- 
tion of these policies since with the passage of time the accumulation 
of capital and the growth of industrialism have become more and 
more remarkable and more and more widespread. A century ago 
one country could dominate the attitude of foreign states toward 
China; that is no longer true and in the competition of great states 
for her favors lies China’s new diplomatic strength. 

China is in a strong position. Will she be able to take advantage 
of her position? Will she, in the first place, be able to reconcile her 
foreign colleagues to turning over to her the administration of her 
customs service, upon the integrity of which the happiness of so 
many bondholders and the smooth, impartial conduct of trade de- 
pend? Will she be able to convince the extraterritoriality commis- 
sion? that the reforms of which so much has been said and written 


2 The report of this commission has now_been issued and may be obtained from the 
Superintendent of Documents, Government Printing Office, Washington, D. C., at 25 cents 
per copy. 

[10 ] 


71 


are genuine and that administration, though militarized for the 
Chinese, will be civil to the foreigner? No administrators ever had 
a harder task nor a less grateful one. Yet with foreign needs and 
rivalries working for them they may overcome the handicaps of their 
own domestic difficulties. 

These difficulties date from the republican revolution of I9II, 
when that familiar anomaly of a fundamental change in the estab- 
lished order of things being brought about by a comparatively few 
leaders was repeated. Some of the leaders were opponents of the 
old régime on grounds of provincial jealousy, others were converts 
and missionaries in the cause of democracy. Since that date the 
struggle has continued, on the one hand between those who, for 
various reasons, desire the rule of a parliament and those who are 
seeking to restore a strong executive to Peking, and on the other 
between rival groups in both the civilian and military camps, which 
are likely to form alliances with enemy factions in order to defeat the 
purposes of their own proper allies. China is passing through a 
confused period in which the power of government has become dis- 
persed. The problem is one of gathering the elements of authority 
together once more. In such a period it is doubly remarkable that 
China not only has not broken apart into fragments but has risen 
considerably in the scale of international values. 

To say that the republican revolution was due to the introduction 
of western ideas and western capital into China is not to impute 
blame to the West for the revolution or its early unfortunate results. 
China was entitled to fair treatment but not to insurance against the 
inroads of ideas. On the other hand, it is apparent that Western 
interests are called upon to accept all the results of their enterprise 
in China. The lean years come as well as the fat. It is just as 
ridiculous for the foreigner to storm against the corruption and 
militarism now rampant in Chinese political life as it is for the Chi- 
nese to curse the day that Andrade dropped anchor at Shangchuen. 

With the success of the republican revolution Yuan Shih-k’ai, 
a former viceroy and the creator of China’s modern army, was elected 
President. Yuan was in no sense a liberal in politics and his elec- 
tion by the newly-assembled parliament was not in accordance with 
their desires. Yuan, however, had the effective northern army at 
his back, he had a faction of northern senators and representatives 
in the national assembly and he was favored by the great powers and 


[rir] 


72 


their bankers. Sun Yat-sen, the chosen leader of the liberals, had 
no personal military following and no unified provincial sentiment 
to rely upon. It was hoped that constitutionalism would develop 
gradually. 

In a sense that hope has been fulfilled. Two attempts to restore 
the monarchy have been thwarted and the movement for a well- 
conceived national constitution has been paralleled by movements 
in a number of provinces with the object of supplying themselves 
with constitutions of the Western type. A very considerable body 
of legislation has been drafted in the form of codes and laws, which 
have been applied where possible by the courts though not actually 
passed as yet by a national legislature. The opposition of the mili- 
tary leaders to a formal constitution embodying liberal principles 
has been dropped. 

These developments, however, are little more than appearances. 
The actual governing has been done by executives in no sense rep- 
resentative of the people. President Yuan Shih-k’ai quarreled with 
the Assembly over the nature of the constitution to be drafted, ex- 
pelled the members of the party that opposed him and finally dis- 
solved both the national and the provincial assemblies. He failed, 
however, to make himself emperor. His successor, Li Yuan-hung, 
made an effort to respect the reassembled parliament but was 
thrown out by one militarist effort to restore the Manchus and kept 
out by another clique of generals, while a large part of the redis- 
solved Assembly migrated to a more cordial environment in South 
China. In Canton this remnant elected a new President, Sun Yat- 
sen, while at Peking a new assembly, pitch-forked into existence, 
chose Hsii Shih-chang, a well-intentioned tool of its paymasters, to 
the presidency. Thus China had two parliaments and two presi- 
dents—but no genuine government. Hsii was displaced upon the 
rise of a hostile faction to power and Li Yuan-hung was allowed to 
stop the gap until the political wheel had turned far enough to per- 
mit of ousting him in favor of a full-fledged militarist, T’sao K’un. 
T’sao was caught in turn and compelled to spend many months in a 
palace prison while Tuan Ch’i-jui, the puppet of another military 
faction, assumed the pretence of office. Tuan left his post to seek 
safety upon the return of T’sao’s friends to power. At present the 
presidential chair is unfilled but the ‘‘Old Parliament” is trying to 
convene and it may be anticipated that its members, out of the 


[12] 


73 


ripeness—not to use a stronger simile—of their many years of ex- 
perience, will be able to name another figurehead. 

In the provinces also civil headship has quite disappeared with the 
destruction of the marvelous influence of monarchy and the clash of 
factions for power which could be obtained only with the help of 
armed forces. The governing system of the provinces, however, 
remains unchanged. Two features of the provincial situation are 
responsible for the evil effects of rule by militarists—the prevalence 
of factions and consequent revolts and the waste of the whole coun- 
try’s funds. If each tuchiin, as the Chinese entitle the governors, 
were safe in his own province from attack either from the outside 
or from within, no doubt his unified authority would be a desirable 
influence in maintaining order. He might also, in that case, be more 
inclined to remit taxes, duties and other revenues to the central 
government. But the tendency has been to form cliques, and cliques 
within cliques, in an apparently unending series. 

It is important to remember how brief a period, hardly a decade, 
has elapsed since the death of Yuan Shih-k’ai. Ten years is a very 
brief period in the life of a nation, however significantly it may effect 
the fortunes of individuals. It is so brief that one hardly dares ven- 
ture to suggest whether the tendencies in provincial politics are 
toward unification or toward still greater separatism. It would 
seem, however, that the number of factions is increasing and that v 
with this increase the number of combinations of factions also is 
greater, with a correspondingly increased list of military leaders 
who possess strength outside their own provinces. Any single leader 
ambitious to control all China is, therefore, likely to find it increas- 


_ ingly more difficult to satisfy the ambitions of those whose support he 
_ will have to win. On the other hand, he may find it easier to compel 


| 
| 
! 


| acquiescence by many minor adventurers than by a few very power- 


ful rivals. 
In the face of the omnipresence of civil strife, it is perhaps futile 


_ to speak of the evolution of political ideas and institutions. It is im- 


portant, however, to keep constantly in mind the fact that the item 
of internecine warfare is not characteristic of China, that it is hated 


| most bitterly by the resvectable classes—the scholar, the farmer, 
| the merchant and even by the despairing coolie who never knows 
_ when he may be caught by a conscription squad and hustled into a 
_ uniform, That these classes do not revolt is due to their inacquaint- 


ec 


74 


ance with political responsibility. China under the empire was 
governed not by men but by the spirit of loyalty to an idea. The 
emperors did not rule but reigned—grandly, universally, mystically. 
Officials were the tangible evidences of that unimagined power. 
But the life of the people was family life, the precepts for their action 
were social precepts. There was no responsibility for the individual 
beyond the locality. There is today no confusion in the localities, 
the villages and the districts move in the ancient grooves. What is 
lacking is the understanding of representative government which 
would transfer the effectiveness of local administration to the pro- 
vincial and the national capitals. 

Where so much must be learned before China may expect to have 
a genuine republic it seems logical to begin learning by experimenta- 
tion in provincial rather than in national institutions. There is some 
evidence that this idea has made headway in China. There appears 
to be a tendency in certain provinces for the civilian lamb and the 
militarist lion to lie down together. The movement for federalism 
is growing stronger each year. Unfortunately it is felt to involve a 
great sacrifice for a tuchiin to drop out of national politics while a 
man like Governor Yen of Shansi who is anxious to do so is subject 
to constant interference by those who desire his support or resent his 
indifference. Peking is a fatal lure to take a provincial governor 
away from his own proper business. Were it not for the impossi- 
bility of foreign states conducting relations with China deprived of 
a national capital it might be better to dispense with Peking. The 
national government is impotent and the provinces would be less 
subject to civil factionalism if the incentive to obtain control of 
Peking were absent. 

Would such a development result in the break-up of China? No 
doubt it would.contribute to that misfortune if foreign powers took 
advantage of the situation. If the Chinese were left to themselves 
it is probable that no such effects would be felt. In place of a na- 
tional political organization China has a universal system of social 
and moral ideas which provides a cultural nationalism of great 
unifying power. In spite of intellectual imports from the West the 
respect for Confucian traditions is intact and it appears to be under- 
going a revival of influence among the so-called ‘Western returned 
students.’’ The Chinese comprehend nationalism in this sense and 
would be opposed to any movement to foster the prosperity of a 


[14] 


| 
it 
|! 


75 


single section or province at the expense of the whole nation. Dec- 
larations of independence have been made from time to time by 
certain provinces or groups of provinces but have aimed rather at 
temporary administrative autonomy than at actual and final sever- 
ance of national bonds. 

Although there is little reason to anticipate the withdrawal of 
recognition of the passing Peking juntas by the Powers, the facts 
of the situation appear to indicate the desirability of emphasizing 
and encouraging the development of orderly and prosperous govern- 
ments in the provinces rather than of insisting upon something that 
is apparently impossible to obtain at present—a strong central govern- 
ment. It is probable that what may appear to be the longer way 
round will prove the shorter way home. As for the national govern- 
ment it is not essential that it exercise all the powers that it might 
desirably possess. The development of orderly civil government in 
the provinces will gradually conduce to the shar gins of the 
national government. 

In the interim between no government and strong government at 
Peking what may be expected to happen? It would be fortunate if 
there might be arranged a conciliar executive, representative of the 
real leadership of the country. The alternatives to such a govern- 
ment at Peking are two—the ‘‘strong man”’ and the continuance of 
the present situation. After so many failures on the part of what 
appeared to be “‘strong men’’ one loses confidence in that remedy. 
On the other hand, it seems very doubtful that the control of the 
capital, especially when that capital is Peking and when the difficul- 
ties of handling loan and other negotiations anywhere else are so 
great, ever will cease to be a desideratum of the highest importance. 
If these things be true either Chinese militarists and politicians must 


_- get together or the civil warfare must continue to accompany politi- 


cal development until such a time as the civilian forces of the state 
have overthrown the military and taken the leadership of affairs 
into their own hands. Perhaps this latter alternative is, after all, 
the only logical one to anticipate. 

Two powerful forces are at work to destroy each other in the con- 


‘temporary international relations of China; the older diplomacy of 


the powers that fought the World War and made the Peace of Ver- 
sailles together and the new diplomacy of the Union of Soviet Social- 
ist Republics. The outcome is still in question. On her side China, 


[15] 


76 


although she has not lost but rather has gained standing in the inter- 
national community during the Republican period, is faced by diffi- 
cult problems in her relations with a number of powers as she seeks 
to obtain a position of equality with them. The powers with which 
she is particularly engaged today are Japan, Russia, Great Britain 
and the United States. France is inclined to maintain her position 
and to act as an individual in the Far East. Germany is slowly re- 
gaining trade and influence. The relations of the first-named powers 
with China dominate the present scene. 


JAPAN 


Japan at the present juncture wears the smooth vestments of con- 
ciliation. Deprived of her Shantung acquisitions, her Manchurian 
“Demands” reduced or denationalized, her amour propre outraged 
by the immigration act, Japan has given the world an amazing proof 
of civilization in her temperate conduct. She has turned the other 
cheek when she might have been expected to indulge in a frantic 
but futile program of revenge. Her view today is the long view; she 
is willing to wait. And while waiting she is improving her time 
making friends; not as a respector of persons either but wherever 
she finds a welcome. Beyond doubt this friendly attitude has suc- 
ceeded. No state today calls Japan enemy, not even China. With 
Russia she is back on terms of tolerance. And she maintains her 
place among her allies and associates of the War period with un- 
diminished influence. 

This happy position she has attained within a decade of the 
“Twenty-one Demands’ and the “Nishihara Loans”. And during 
that decade her political and economic fabric has been pulled and 
hauled more persistently by reformist elements than at any previous 
period while her problem of after-war readjustment has been a 
serious one. Her accomplishment is remarkable and is to be attri- 
buted to the astuteness of her statesmen and the reserve strength, 
physical and mental, of her people. 

Toward China Japan’s policy is aimed at bringing about a common 
attitude and a joint program of action in the preservation of the 
territorial and administrative integrity of the two empires. This 
policy is complemented by an unofficial movement among the lit- 


3 For text see publication No. 45, Carnegie Endowment for International Peace, Division 
of International Law. 
[16] 


77 


erary people of Japan toward producing a mutual regard among 
Japanese and Chinese for Oriental culture and mutual action to 
maintain and intensify it. This phase of the situation resembles the 
stimulation by certain groups in England and the United States of 
the mutual recognition of ‘“‘Anglo-Saxon”’ customs and ideals. The 
existence of the policy of conciliation is demonstrated by Japan’s 
action in restoring Tsingtao and the Shantung railway and other 
privileges, by her withdrawal of troops from Hankow, her surrender 
of her control of the “‘Asiatic Monroe Doctrine’’—tacit in her ac- 
ceptance of the abolition of spheres of influence in China—and her 
withdrawal of Group V of the Twenty-one Demands, also by anum- 
ber of less advertised actions, such as her support of Chinese opposi- 
tion to a foreign railway supervisorate, her lukewarm support of 
the Consortium’s conditions of financial supervision by lending 
powers, her attitude on certain issues at the Tariff Conference and 
her failure to take vigorous action in a number of incidents in which 
Japanese nationals have been killed or injured, the last of which 
involved an affront to a Japanese warship. All of these circum- 
stances and others that might be cited exhibit an attitude the reverse 
of that represented in the Twenty-one Demands and one that must, 
in time, have its effect upon Chinese sentiment. 

Unfortunately, a large part of the favorable influence thus being 
exerted is cancelled in the Chinese mind by Japan’s policy in Man- 
churia. Just what that policy is it is difficult to summarize in a 
paragraph. The most important of the Twenty-one Demands that 
still survive are those which compelled China to extend the leases of 
Liaotung, with its great ports—Dairen and Port Arthur—and the 
railways of South Manchuria to 99 years. And with the leases are 
associated Japan’s monopoly—in fact if not in name—of the Feng- 
tien coal and iron beds. .In the Consortium negotiations—the out- 
come of which was made a part of the record of the Washington Con- 
ference*—Japan was led to water down her expression of railway 
ambitions in Manchuria. But she did not surrender them by any 
means and it is highly significant that the Consortium has not built 


_ any railways in Manchuria while the South Manchurian Railway 
_ has been engaged recently in laying rails north from Taonanfu for a 
_ line which was specifically set down in the negotiations as one to be 


built by the Consortium. Ostensibly the work has been done on 
4 Washington Conference on the Limitation of Armament, International Conciliation, 


a 


| Nos. 169 and 172. 


78 


contract for Chang Tso-lin, the dictator of Manchuria. But to the 
Chinese it must appear as though the Consortium had made a 
“‘srand-stand play” to get Japan to include her spheres within the 
pooling limits of the associated banks in order to get China’s con- 
fidence, with the understanding that Japan would be left alone in 
the actual exploitation of South Manchuria and Eastern Inner Mon- 
golia. Meanwhile South Manchuria fails to attract non-Japanese 
enterprises and takes on day by day a more Japanese aspect. Is 
Japan hoping that a policy of supporting China’s wishes elsewhere 
will prove an adequate compensation for South Manchuria? In 
the development of Chinese sovereignty there will not be room for 
the obvious political corollaries of the sweeping economic activities 
which Japan now exercises in that region. Either Japan will have 
to restrict herself to purely economic enterprises or she will have to 
annex the region. So long as the Chinese continue to believe, as 
they do today, that Japan contemplates—given the time and cir- 
cumstances—the annexation of a portion of Chinese territory, 
Japan will find it difficult to bring about that cordiality of relations 
which today she is seeking so consistently. 

With Russia Japan is back on a treaty basis and an influential— 
but not the most influential—section of Japanese opinion is sup- 
porting the establishment of a close accord with the Soviets. The 
success of that group, however, would involve a sacrifice of Japanese 
ambitions, which are no longer satisfied with a free hand in develop- 
ing southern Manchuria but contemplate railway building and other 
enterprises in the northerly portions of that great region which were 
recognized by Japan previously as Russia’s sphere of activity. Rus- 
sia continues to desire that sphere, is in a position to hold it and 
cannot be expected to ally with Japan on any other basis than the 
old one of a division of Manchuria and Mongolia between them. A 
nice problem, therefore, remains to be worked out between Japan 
and the Union of Soviet Socialist Republics. 

Undoubtedly Japan places first after the retention of her Man- 
churian position the maintenance of the most cordial relations with 
the United States and the British Empire. In this connection the 
outstanding features are the doctrines of the open door and the in- 
tegrity of China. Toward making these doctrines effective Japan 
made by far the greatest contribution at the Washington Conference 
in surrendering her Shantung conquests, raising no objections to the 


[18] 


79 


operation of the most-favored-nation clause in South Manchuria, 
agreeing to the abolition of spheres and dropping Group V of the 
Twenty-one Demands. Through these provisions Japan aligned 
herself definitely with the powers which have stood most consistently 
for the open door and China’s integrity. 
Granting this, Japan’s problem is that of maintaining harmonious 
relations with her two great competitors for the trade and exploita- 
tion of China while at the same time seeking to establish a Far East- 
ern ‘‘front”’ toward the West and to explore the possibilities of her 
new rapprochement with Russia. She has the great advantages over 
Great Britain and the United States of position, of cheaper labor 
and of intimate acquaintance with the civilization of China. If she 
wished she might raise the slogan of race equality. But so far she 
has demanded simply equality for her own people, a sign of her 
difficulty in trying to face both East and West at the same time. 
What she lacks are capital, mineral resources and food for her people. 
The two latter she now obtains from South Manchuria and to retain 
them, on some assured basis, she would probably stake her existence, 
as would any other people which had received recognition as a great 
power. 
Japan is not inclined today toward any type of cooperation with 
other powers designed to supervise or control any feature of Chinese , 
administration. In this respect she is, apparently, more solicitous 
of China’s administrative integrity than are the other Consortium 
powers. That may be true or it may be that she anticipates greater 
influence for herself if the proposals of international supervision are 
thwarted. At any rate her opposition to any extension of foreign 
supervision is an obstacle to smooth relations with the other powers. 
At the same time it is in accord with China’s new nationalism and 
with the vaunted anti-imperialism of the Soviets. This develop- 
_ ment, together with the fact of the Russo-Japanese treaty, finally 
_ concluded after a prolonged series of negotiations, and the arrival 
of China and Russia upon a working basis, has promoted the sug- 
gestion that a Far Eastern bloc is in process of formation having for 
its main object the destruction of Western preferential rights in 
China and the adoption of a unified program toward other powers. 

The considerations already dealt with which have a bearing upon 
such a possibility need not be rehearsed. It is clear that Japan wishes 
to pursue a policy of friendship toward all nations today and that 


[19] 


80 


she will not willingly join any combination that would bring her into 
opposition with other countries. She prizes her high place in inter- 
national society and her very profitable trade with the United States. 
She has special reasons for seeking the confidence and cooperation of 
China and Russia but it would be no compliment to Japanese di- 
plomacy to suggest that it would think of weighing China and Russia 
in the balance as against the British Empire and the United States. 
Nothing but the desperation of a struggle for self-preservation would 
lead her to take that course. At present there is no sign in the sky 
to warn of the approach of such a struggle. 


RUSSIA 


To analyze the contemporary position of Russia in the Far East 
is a task rendered no easier by the progress of the Union of Soviet 
Socialist Republics in obtaining recognition from all the great powers 
save the United States.’ If her success in that direction has brought 
her back into international society it has not increased her respect 
for its diplomatic usages nor for the world policies of any of its lead- 
ing members, world policies which she, with doubtful consistency, 
asperses. Consequently it is necessary to take account of her de- 
clared principles of a world proletarian dictatorship and of opposi- 
tion to imperialism while surveying her activities for evidence on 
their relationship to her theories of government and international 
politics. 

The Soviet Government won the esteem and confidence of the 
Chinese people when it surrendered voluntarily those general treaty 
rights—extraterritoriality, customs control, residential concessions, 
and legation guards, which the newly-awakened nationalism of 
China so strongly resents. It is true that the Chinese Government 
had cancelled a number of Russian rights prior to 1924 so that the 
treaty of that year between China and the U. S. S. R. was little 
more than the recognition of faits accomplis. And it may be stated 
with some assurance, in view of the short-sighted encouragement 
given by allied powers during the war period to Chinese action in the 
deportation of Germans and the confiscation of their property, that 
Soviet efforts to retain the treaty rights would have failed to obtain 
the support of the powers. The Soviet Government hardly can be 
blamed for resenting the one-sided abrogation of the privileges in- 


See International Conciliation, No. 217, p. 20. 


[20 ] 


8I 


herited with the Tzarist treaties, since thereby its bargaining power 
was greatly diminished. But it appears now to be probable that it 
intended to surrender its rights in order that it might use its new 
position of ‘‘equality’’ with China as the platform from which to 
deliver the attack upon the ‘imperialistic powers” which has ap- 
peared as the most striking and consistent feature of its policy in 
China since May 31, 1924. 

Between 1920 and 1926 there has been time for the Chinese to 
appraise the Russian sacrifices and to discover that they do not 
include all that had been anticipated from the manifestoes that were 
published. On the Russian side it has been found that the influence 
of Chang Tso-lin, in control of Manchuria, must be countered before 
arrangements made with a less recalcitrant government at Peking 
can become effective. Relations which seemed to be developing very 
cordially, culminating in the Sino-Russian agreement of 1924, have 
not yet produced a definitive treaty and the likelihood of such a 
treaty being signed is difficult to estimate. In the meantime the 
Soviet Government has employed itself in public incitement of the 
Chinese people to a revolt against the ‘‘unequal treaties.’”’ The sig- 
nificance of the denunciations, the amount of ‘‘Soviet gold”’ distrib- 
uted and the influence of Russian civil and military advisers, have 
been exaggerated. The Russian sun and rain have played upon soil 
well-seeded and fertilized to produce an earlier crop. The seed and 
fertilizer have been the general contribution of Western ideas, not 
least of them American. Nor is the crop genuinely Bolshevik, since, 
as the Russians themselves admit, Chinese conditions are not suited 
to the development of communism. China has no exploiting class 
and no great class distinctions, no autocracy in government, land- 
holding or the church. She is, however, educationally, industrially, 
and politically backward and she has come recently to ascribe her 
backwardness in large part to the various restrictions placed upon 
her movements by foreign control of her revenues and foreign exemp- 
tions from her laws. Wherefore her ready response when a single 
foreign nation surrenders rights which preachers and teachers of 
many foreign institutions in China have taught their students to 
regard as essential to that vague but universally desirable attribute 
which western states call sovereignty. 

As in the case of Japan progress toward a mutually satisfactory 
Sino-Russian régime finds obstacles in the obvious intention of the 


[21 J 


82 


Soviets to retain the old Tzarist spheres of influence in Outer Mon- 
golia and northern Manchuria. True, Russia recognized in 1924 
“that Outer Mongolia is an integral part of the Republic of China” 
but it is well-understood that the recognition of sovereignty has 
been in the past and may be in the future the disguise put on by a 
more powerful government in which the actual administrative con- 
; trol and usufruct of the ‘‘protected”’ territory resides. Russia faces 
| Japan for the control of northeastern Asia just as truly today as ever 
| before and she would hesitate, even if she were inclined to do so, to 
_ withdraw her influence from a region bordering her own territory so 
lengthily when the probability of Japanese influence taking its place 
is so strong. But in view of her long-standing interest and influence 
in Mongolia and of the comparative success of her propaganda there 
Russia is not inclined to do more than pay lip-service to the weak 
and distracted Chinese Government. 

As for northern Manchuria the Soviets have dispossessed the sur- 
viving Tzarist influence in that region by the simple device of con- 
senting to declare with China that ‘‘the Chinese Eastern Railway 
is a purely commercial enterprise’’—as if it could be made such by 
the mere statement. Although the administrative usurpations of the 
old Russian régime in the railway zone have been swept away there 
is no way by which a great power can operate a railway through 
the territory of a weaker state without exercising political influence 
over the area and the government. Northern Manchuria thus con- 

» tinues a sphere of Russian influence just as southern Manchuria 
remains a Japanese sphere. China hardly will deal confidently with 
Russia under such conditions. Particularly when the Soviet Govern- 
ment, in its anxiety to get into control of the railway, stooped 
to make a separate treaty with Chang Tso-lin, who had, two 
years previously, declared Manchuria independent of the Peking 
Government. 

Russia promises, without date, to withdraw her troops from 
Outer Mongolia and to permit the Chinese Government to redeem 
the Chinese Eastern Railway. It would seem that events may 
render both these promises obsolete. It would seem that there is 
the gravest possibility of circumstances, among which China’s in- 
ternal confusion would prove the primary factor, promoting a divi- 
sion of the spoils, on either a friendly basis or after another con- 
flict, between the two powers at present in actual control of the vast 


[22 ] 


83 


northern marches of China. The disadvantages thus suffered by 
Russia and Japan in their diplomatic relations with China are not 
unique. Rather do they serve to place those countries, in Chinese 
eyes, in the same class with the rest of the imperialistic powers and 
to offset any special advantages of position or similarity of culture. 


GREAT BRITAIN 


The Chinese people respect and fear but do not love the British- 
Upon them they place the major portion of responsibility for forcing 
China to admit western intercourse upon equal terms and they 
think of England today in terms of territories lost or well-nigh lost, 
of government services—the customs and salt administrations— 
managed by aliens, of peremptory demands for strict observance of 
treaties,—in short to the Chinese Britain stands as the author of their 
unequal international status and the guide of the Diplomatic Body 
in maintaining it. ’ 

The British reply to this attitude is characteristic: ‘‘Let the dead 
past bury its dead.’”’ To quote a recent writer: ‘‘Whether the 
foreign Powers were justified in breaking down the barriers imposed 
by Chinese ignorance and arrogance is no longer an issue. It was 
settled nearly a century ago.” That for the issue of right. Andas 
to the issue of advantage the author’s next statement is typical: ‘‘And 
large and perfectly legitimate commercial interests, from which the 
Chinese have benefited to an even greater degree than the foreigner, 
have been developed in consequence.’ The first argument over- 
looks the fact that no issue is settled by force while the possibility 
of altering the settlement by growth in strength continues to inspirit 
the weaker party. The second is more substantial. But it also is 
defective, as many similar situations have proved, in that it rests 
upon the mistaken assumption that a people will exchange self- 
government for financial or other economic advantages. 

The British have been, from the beginning of trade with China, 
at the centre of every argument which concerned the treaty rights of 
foreign states. History repeated itself very recently. The incidents 
involving bloodshed at Shanghai and Canton in May and June, 
1925, have reacted upon the whole foreign community in China but 
principally upon the British. British trade is suffering a boycott 
today at Canton while that with other countries is welcomed. It 
has been the policy of Great Britain to deal firmly with the Chinese, 


» F2ga 


84 


to take no chances, to rely upon the shrewd business sense of the 
people rather than their friendship, to assure the safety of the foreign 
community by intimidation rather than conciliation. Whatever is 
owed to that policy in the past it has produced a legacy of ill-will 
to set beside its benefits. 

Added to her own sins in the eyes of the Chinese were those of 
Japan when, in consequence of the Anglo-Japanese alliance, Great 
Britain was practically forced into endorsing the aggressive program 
of Japan. With the termination of the alliance began a new period 
in British relations with China, one in which emphasis was to be 
placed upon cooperation with the United States and the actual appli- 
cation of the Open Door doctrine. The evidences of the new policy 
on the British side are collaboration with the United States in deter- 
mining the scope and terms of the loans that might be made by the 
Consortium and acquiescence in the American policies of holding the 
tariff revision conference and of carrying on the investigation of 
extraterritoriality and Chinese legal administration as provided for 
at the Washington Conference. In all of these projects the British 
Government has gone counter to the loudly expressed views of the 
British commercial community in China, though it has had the 
endorsement of the financial directorates in the City 

British relations with China were rendered more cordial by the 
statement of intention to restore Wei Hai Wei, the British lease in 
northern Shantung, but negotiations to that end have not moved 
rapidly. Opinion among British missionaries in favor of treaty 
renunciation has been gathering force and has been exerted to affect 
the action of the Government. Symptomatic of the realization of 
the issues at stake is the recent action of the Shanghai municipal 
council in voting to recommend the admission of a limited number of 
Chinese members. Recently the British parliament voted to return 
the unpaid portion of the British share of the Boxer indemnity to 
China. Most significant of all the evidences of the change in the 
British attitude is the refusal of the Government to compel the open- 
ing of the port of Canton, closed by the boycott, to British trade, in 
spite of the large losses undergone daily by British merchants through 
its closure. 

The question of Tibet remains an issue between China and Brit- 
ain. That little-known region wishes to continue as in the past an 
autonomous vassal state of China. No doubt that relationship would 


[24 ] 


85 


be satisfactory to China if she could feel confident that it would 
remain permanent. But she fears that advantage will be taken of her 
slight control over Tibet and desires to bring the area more com- 
pletely under her government. To Britain the interest in Tibet is 
two-fold—trade and security. She desires especially to maintain 
Tibet as a buffer state against Russia and she feels that the present 
status of Tibet is admirably suited to her purposes. In 1912 she 
refused to permit China, under the strong government of Yuan 
Shih-k’ai, to conquer the faction in Tibet that was opposing a closer 
integration of the territory with China. Not, apparently, wishing 
Tibet for herself, she will not permit it to become a portion of China 
proper. The issues involved compose a problem of extreme difficulty 
and one of which no solution appears to be in sight. 

The Chinese realize that the amelioration of their international 
status depends principally upon the attitude of Great Britain, due 
to the preponderance of that country’s investment in the trade and 
development of China. What they should also realize is that the 
British argument of mutual advantage is well-founded. In British 
governmental circles it appears already to be recognized that the new 
spirit of China calls for new methods of treatment and that it will 
be necessary to establish a more equalitarian relationship between 
China and capitalist nations before the former profitable era of 
railway and industrial development can be revived. Undoubtedly, 
British interests, like those of America, will prosper most in an at- 
mosphere of equal opportunity provided that the Chinese are enabled 
to feel confident that the same equality exists for them as for the 
nations competing for their trade. The British position is a hard one 
today because it appears inevitable that in the impending period of 
restoration of authority the largest foreign interests will suffer the 
most. It is for China to take account of this fact and to moderate 
her demands for immediate emancipation. The important con- 
sideration is that the movement be forward and that Britain do not 
appear to be retarding the movement gratuitously. 


THE UNITED STATES 


Americans have not been mistaken in believing that the Chinese 
have regarded them as friends. Without smugness, because out- 
siders admit its truth, Americans may claim to have dealt more 
fairly with China than has any other important trading and investing 


[25] 


86 


people. That the Chinese of every class and in all parts of the coun- 
try know this is evidence of the existence of channels of information 
accessible to the illiterate. The resulting good-will today is less 
evident. The people of China are tending to place America ina com- 
mon category with the “imperialistic powers.’”’ It is not difficult 
to see why. 

America’s good name in China was earned during a period when 
other western countries were seizing her territories and demanding 
extensive spheres of interest. It was John Hay who, while terminat- 
ing the movement toward the break-up of China, introduced the 
principle of the open door and in so doing placed the United States 
on an equality with other states in the economic development of the 
country. For two decades the open door policy was destined to lie 
in the pigeon-holes of foreign offices, to the disadvantage of the 
United States financially but to the preservation of American credit 
with the people of China. President Wilson contributed to our 
prestige in withdrawing from the first financial consortium in 1913. 
The change in America’s position came when the President changed 
his mind and endorsed our re-entry into the consortium. The 
United States then became the dominant voice in a superpowerful 
combination of capital which was prepared to shut off the greater 
sources of loan funds from China unless that country would authorize 
a degree of foreign financial supervision which it considered both 
objectionable and dangerous. The life of the new consortium has 
been contemporary with a period of almost utter stagnation in 
governmental reorganization, railway-building and other construc- 
tive enterprises. For this the United States is held mainly respon- 
sible. Apparently China would rather take her chances with the 
powers separately than with the combination represented in the 
Consortium. 

A second explanation of China’s new attitude toward the United 
States lies in the definite establishment of the policy of cooperation 
with Great Britain which grew out of the Great War. To China that 
development meant a stiffening of American, as well as a relaxation 
of British policy. Evidence that this was a well-founded anticipa- 
tion is forthcoming in American endorsement of the still-born 
plan to place a police force under foreign command over China’s 
railways, in American participation in the protection of the Canton 
customs funds against seizure by Sun Yat-sen and in the recent 


[26 ] 


87 


threat to take naval action if the Peiho were not opened to traffic, 
as well as in the absence of criticism of such incidents as occurred last 
year in Shanghai and Canton. The attitude of the Department of 
State has not always been imitated by the representatives of Con- 
gress nor by private individuals. 

The United States has been criticized by the Chinese for its 
failure to effectuate the open door policy. At present there is serious 
doubt among them regarding the American Government's attitude 
on the question of Manchuria. Loans of American banks to Japa- 
nese quasi-governmental corporations to be used in stimulating 
Japanese immigration to and industrial development in Manchuria 
appear to the Chinese, ignorant of the real attitude of the State 
Department toward such loans, to be evidence of indifference to 
the fate of Manchuria. American trade has not been able to meet 
Japanese competition, the Consortium has made no progress toward 
railway development and there appears to be, in general, a wait- 
and-see policy regarding the region. It would appear that the lack 
of regular relations with Russia is a felt deficiency in the American 
diplomatic equipment for affecting the progress of Japanese control 
in South Manchuria and Eastern Inner Mongolia. It is not sug- 
gested that the American Government desires to hinder the develop- 
ment of Japan. America’s relations with China are conditioned 
primarily by the universal desire of the American people for peace 
and friendly relations with Japan. What is desired is to accommo- 
date Japan within the limitations of the open door and integrity of 
China policies. The record of the Washington Conference contains 
very little information on the problem of Manchuria but what it 
contains indicates that the government of the United States still 
regards Manchuria as a part of China. 

In spite of these changes in the American situation it is probable 
that the United States has not altogether lost its special position 
in the confidence and good-will of the Chinese people. What was 
lost at Versailles was regained at Washington. American leadership 
has been marked in the effort to effectuate the tariff treaty and the 
resolution on extraterritoriality. The sentiment of American mis- 
sionaries has offset the views of the associated American chambers of 
commerce in China. And the absence of such physical evidences of 
interference as settlements, leases, spheres, and protectorates con- 
tinues to give to America a margin of advantage in Chinese eyes. 


[ez J 


88 


The American position is not an easy one. There is danger of 
falling between two stools—interest in the strengthening of China 
and in retaining her friendship on the one hand and cooperation with 
Great Britain and other powers on the other. To fail in the former 
desideratum would be to destroy a tradition and to lose an impor- 
tant advantage in the race for trade and investment opportunities, 
while to be isolated would mean to be compelled to meet vigorous 
international competition and to lose an opportunity for leadership. 
It will require the most astute diplomacy to keep the confidence of 
both sides. 

CONCLUSION 


~The present situation of China points to the close dependence of 
a country’s foreign relations upon domestic conditions. It is in 
spite of those conditions, not because of them, that China has re- 
gained territory and authority which had been in the possession of 
other states. Were she today a well-knit and orderly community 
there can be no question of her immediate success in obtaining general 
recognition of equality. 

The Chinese leaders are unwilling to wait upon the advent of 
internal sobriety to secure the advantages of external sovereignty. 
The question that arises is one of the possibility of compromise, of 
each side consenting to give way in part for the sake of a gradual 
and peaceful deliverance from the deadlock that now exists. 

Present tendencies run toward such a development. All of the 
powers having special privileges in China are showing a cordial 
attitude toward an improvement in her position. At the same time 
they are insisting firmly upon the preservation of protections for 
foreign lives and property. It would seem that a people as eminently 
reasonable as the Chinese would not deny the justice of that insist- 
ence. There is need of greater confidence, however, in the good in- 
tentions of their foreign friends. This confidence should develop 
if the powers continue to show toward China the present attitude of 
non-interference and patience. 


RECENT EVENTS 
CONSTITUTIONAL AND POLITICAL 


Since the completion of this article events of considerable, if not 
of major, importance have occurred in China and in that country’s 


[28 ] 


ie ee eee 


89 


relations with other states. While it is quite impossible to speak 
conclusively of anything political in contemporary China interest 
attaches to the incidents that reveal tendencies in the undoubted 
progress of-that great civilization toward its wonted calm and toward 
a position of dignity among the nations. 

China has been without a president ever since Tuan Ch’ijui left 
office in April, 1926, at the demand of Marshal Wu Pei-fu. Shifting 
cabinets have been kept im being with difficulty. Among the fac- 
tions contending for supremacy in North Chima none has been strong 
enough to control a presidential selection nor conciliatory enough 
to acquiesce in a coalition choice. Consequently a logical enough 
development has taken place in that the cabinets have represented 
the dominant forces and the capital has had a coalition, conciliar 
executive made up of the proxies of the more influential fuchan- 
Only the militarists who for the time being pretend to be somewhat 
friendly toward each other have, however, been represented. 

Probably love’s labor is lost in attempting to determine the con- 
stitutional aspects of the current situation in Peking The so-called 
permanent constitution, which came into effect om October 10, 1923, 
was declared suspended by the provisional government of Tuan in 
1924. If it be granted—what would be difficult to prove—that the 
constitution had been constitutionally established there arises the 
question of the authority of a provisional executive to suspend it. 
Furthermore, now that Tuan has passed from the scene it may be 
assumed that his acts of an irregular character have passed with 
him. Assuming then that the “permanent” constitution is of legal 
effect, the executive authority rests in the cabinet. Article 76 of 
the constitution reads: “In the event of the vice-president vacating 
his post whilst the presidency is vacant, the cabinet shall officiate 
for the president.” To be sure one may ask how the cabimets are 
appointed but if one examines credentials too closely business must 
stop altogether. 

Of greater importance at present than the constitutional issue is 
the actual territorial extent of the authority exercised at the national 
capital. A success long-sought by Sun Yat-sen, the southern Kuo- 
mintang (nationalist party) leader, was attained during the summer 
of 1926 by his followers. By a combined effort of arms and rhetoric 
the Cantonese forces drove through Hunan into Hupeh and captured 
the triplet cities Wuchang, Hanyang and Hankow. This remarkable 


C29] 


90 


success has given emphasis to the long-standing ineffectiveness of 
Peking authority south of the Yangtze river and has raised appre- 
hensions lest the drive be continued to the capital itself. Between 
the Cantonese and that goal however, lie four substantial armies— 
that of Wu Pei-fu, centering in Honan, of Sun Chuan-fang, based 
on Kiangsu, of Chang Tsung-chang, tupan of Shantung and of 
Chang Tso-lin, now garrisoning Peking and moving toward central 
China. These four armies are loosely allied to maintain control of 
China north of the Yangtze and of the provinces immediately south 
and west of its mouth. Canton hasan ally in Feng Yu-hsiang, whose 
army has not recovered from its recent defeat by Chang Tso-lin 
and is at present scattered through the far interior regions of Shensi, 
Kansu and inner Mongolia. Prospects for Cantonese success to the 
northward appear slight, but it must be remembered that the alle- 
giance of the soldiery is easily swayed. Nothing would be less sur- 
prising than a wholesale flocking of the troops of Wu and Chang to 
the banners of Feng and Canton. A revision of alliances favorable 
to the southern faction is another possibility. Wu and Chang Tso- 
lin are not good friends and Sun Chuan-fang is interested principally 
in holding his place in Kiangsu. 

Should the Kuomintang secure the capital the prospects of order 
and constitutional government would, it seems probable, improve. 
This party has stood from the beginning for liberal ideas and it is 
hardly likely that militarist elements could control it once it gained 
power and international recognition. It is, and has always been, the 
most nationalistic section of Chinese opinion and it demands the 
recognition of China’s equality most loudly of all. But foreign 
powers would have no need of their special treaty position if the 
Chinese Government were ordered and unified. 

Events in Manchuria also have had a direct bearing upon the prob- 
lem of unification. In the fall of 1925 Feng Yu-hsiang broke the 
truce with Chang Tso-lin and very nearly succeeded in ousting him 
from Manchuria. Chang was saved by the action of Japan in for- 
bidding hostilities within the zone of the South Manchurian rail- 
way. Since that time he has, in turn, attacked Feng and driven him 
out of Peking. Perhaps it is not too wide of the mark to suggest 
that had Feng been successful the Cantonese forces, his allies, would 
now be in control of the capital. It appears, furthermore, that if 
the republicans are to control China they must first come to an un- 
derstanding with Japan regarding Manchuria. 


[30] 


gI 
DIPLOMATIC 


China has made greater progress toward international equality 
within recent months than the results of the Tariff Conference and 
the investigation of the extraterritoriality commission would sug- 
gest. It will be recalled that the former was convened in Peking 
on October 26, 1925, in order to carry out the Washington Con- 
ference provisions for a revision of Chinese treaty tariffs. It was 
adjourned sine die on July 3, 1926, the Chinese delegates having been 
forced out by the turn of national politics. The lack of unity among 
the Chinese factions greatly impeded the progress of the Conference 
and but one significant decision was taken prior to adjournment. 
By unanimous vote of the delegates it was resolved that China should 
be recognized as possessing customs autonomy from January 1, 1929, 
China, on her part agreeing concurrently, but not by way of prior 
condition, to abolish kin, the internal tax on goods in transport, on 
the same date. Considerable variation was evidenced in the views 
of the Chinese and the foreign delegates as to the interim tariffs 
to be levied, the classification of goods and the use of the revenue. 
There were also points of difference in the proposals of the foreign 
delegates. Upon adjournment the latter issued a statement to the 
effect that they were unanimously desirous of proceeding with the 
work of the Conference at the earliest moment that the Chinese 
delegates should find themselves in a position to resume discussion. 

The Commission on Extraterritoriality, also set in motion by a 
Washington Conference agreement, completed its work on September 
16, 1926, and presented a fair report of conditions observed, giving 
much greater attention to the Chinese courts and administration 
than to the extraterritorial régime. The report does not reeoommend 
the immediate abolition of extraterritoriality nor elaborate an in- 
terim scheme. It does, however, contribute toward progress by sug- 
gesting reforms both in the practice of extraterritorial privileges 
and in the legal, judicial, and legislative institutions of China and 
their administration. It looks forward to a progressive relaxation 
of the extraterritorial régime and refrains from assuming a patroniz- 
ing attitude. The report of the commission is a very interesting one 
which deserves reading in full. It was signed by all the delegates, 
Dr. Wang Chung-hui signing for China with reservations as to cer- 
tain portions but not as to the recommendations. 

In September, 1926, the ‘“‘mixed court” at Shanghai, which has 


[31] 


92 


been, since 1911, entirely under foreign control, was returned to the 
Chinese. Hereafter the judges will be designated by the Chinese 
authorities while the foreign consuls will sit as assessors only. 

Since the Great War the Chinese have shown an increasing repug- 
nance toward dealing with the treaty states asa group. In harmony 
with this attitude was the action taken on November 6, 1926, by 
Dr. Wellington Koo, acting premier and foreign minister, in abro- 
gating the general treaty with Belgium. Belgium was offered the 
opportunity to negotiate a new treaty but declined to do so and is 
insisting that the question of the right of China to abrogate the 
treaty be brought before the Permanent Court of International 
Justice for decision. China is a signatory of the optional clause of 
the Court protocol but claims that the issue involved is political and 
should be dealt with by the Council or Assembly of the League of 
Nations. She has asked Japan also for revision of the Sino-Jap- 
anese treaty which became subject to revision in October, 1926, 
and has received a somewhat favorable but indefinite reply. 

There are evidences within recent months that the larger powers 
are giving plenty of thought to the further improvement of their 
relations with China. It seems to be true, despite such incidents as 
the intervention at Taku and the shelling, by British gunboats, of a 
Yangtze town, that the forces of moderation in every country have 
gained the upper hand in the decision of policies toward China. But 
what policy should be adopted? That is the real problem, one that 
is badly complicated by the lack of unity in so vast a country. To 
relinquish the treaty rights by negotiation with the Peking Govern- 
ment; to arrive at settlements with that government respecting the 
Chinese debts; to arrange for new loans; what will such decisions 
mean to Canton, to Shanghai, to Tsinanfu, to Mukden and other 
regional capitals? Naturally they will all willingly accept relin- 
quishments of restrictions but will they all as readily carry out the 
engagements entered upon as the basis of a new relationship? 

It appears that the powers are recognizing that they must, in some 
way, obtain the contacts which their essential interests demand 
with those portions of China that do not recognize the constitutional 
authority of Peking. Both Mr. MacMurray, the American minister 
to China and Sir Miles Lampson, newly appointed British minister, 
have had interviews with the leaders of the southern faction. There 
are rumors of a recognition of that faction as a belligerent govern- 


[32] 


93 


ment. The termination of the Canton boycott against British trade, 
which occurred on October 10, 1926, has rendered British-Canton re- 
lations much more tolerable. On December 18 the British minister 
at Peking delivered a memorandum to the ministers of the states 
represented at the Washington Conference, in which a series of 
suggestions for a cooperative policy is recommended. For the most 
part these might have been borrowed from the statesmanlike ut- 
terance of Mr. MacMurray upon closing his highly interesting round- 
table discussion on China at Williamstown in 1924. Epitomized 
they amount to: (a) abandonment of foreign tutelage over China’s 
economic and political development; (b) recognition of China’s 
tariff autonomy upon her promulgation of a new tariff act; (c) 
disclaimer of any intent to force foreign control upon China; (d) 
declaration of readiness to negotiate on treaty revision and other 
questions; (e) immediate, unconditional grant of surtaxes agreed 
to at the Washington Conference; (f) a constructive policy, adapted 
to present circumstances, pending establishment of a real govern- 
ment. The last item is most significant, indicating as it does that 
the powers must give up the earlier assumption that all reform, 
domestic and international, must wait upon the establishment of a 
strong central government. 

What is needed today is a modus vivendi by which practical re- 
sults may be attained without injury to the integrity of China. 
Formal recognition, attended by the establishment of diplomatic 
relations, with Hankow, Mukden, or any other Chinese area, is not 
to be considered. On the other hand the recognition of Peking 
should not be allowed to interfere with cordial and helpful relations 
between recalcitrant regions and foreign states. There is little need 
to fear the break-up of China since the strength of national feeling 
is likely to offset temptations to pursue a separatist program. The 
_ time has arrived for the powers to launch a liberal policy, to reject 
every suggestion of intervention, to set a course without regard to 
treaty rights, to recognize that a new nation is being born. China 
will come her half of the way. 


[33] 


94 


SYLLABUS ON RECENT CHINESE POLITICS AND 
DIPLOMACY! 


A. ExXTRATERRITORIALITY AND CHINESE LAW 
I. EXTRATERRITORIALITY 


Why established; foreign states exercising extraterritorial rights; attitude 
of Chinese toward its establishment 

Scope of extraterritoriality; taxation; police regulations; land; mines and 
factories; inland commerce; missions; residence concessions. 

Foreign consular courts; judicial capacity of consuls; number of consular 
courts; variety of law applied; sources of law for American courts in China; 
treatment of Chinese plaintiffs; appeals; difficulties in obtaining evidence; 
misuse of rights to protect foreign and Chinese criminals; attitude of 
Chinese plaintiffs toward consular courts. 

The “mixed court”’ at Shanghai; original basis of establishment; devel- 
opment of foreign control; effects of Revolution of 1911; return to Chinese 
control; other mixed courts in China. 

Relation of extraterritorial rights to protection of foreigners against 
military interference and banditry. 


II. LEGAL AND JUDICIAL REFORM IN CHINA 


Essential character of Chinese law under the empire; criminal law; civil 
law; punishments; prisons. i 

Legal reform; the new codes; foreign influence in the codes. 

The judicial system; extent of application of the reforms; character 
of the ‘‘new”’ judges; independence of the judiciary; modern prisons. 

The Chinese bar. 


III. THE QUESTION OF ABOLITION 


Earlier proposals regarding modification of the extraterritorial régime; 
treaties of 1902 and 1903; Versailles Conference; Washington Conference. 

Loss of rights by Germans; by Austrians; by Russians; treatment of these 
nationals in Chinese courts; attitude of their governments; effect upon 
their trade. 

Comparison of situation in China with that in other countries at the date 
of abolition: Japan; Turkey. 

Proposals for a transitional period; present system in Egypt; in Siam. 

1 Prepared for the Los Angeles Institute of Public Affairs, by Professor Harold S. Quigley. 


[34] 


sta 


95 


Opinions of different foreign groups in China: missionaries; merchants; 
British opinion; Japanese opinion. 

Work of the Washington Conference commission in the investigation of 
foreign and Chinese legal administration; extent of that commission’s 
authority; its report. 


Bibliography 


Bishop, C. M., ‘‘American Extraterritorial Jurisdiction in China.” Ameri- 
can Journal of International Law, XX, 281-300. 

Chang, Y. C., ‘‘The Chinese Judiciary,’ Chinese Social and Political 
Science Review, II, 68-88 : 

China Year Books, 1921-2 to 1926-7. Contain many public documents, 
including most of the new codes and important laws; also a valuable 
body of material on Chinese judicial administration. 

Chinese Supreme Court Decisions, Peking, 1920. 

Conference on the Limitation of Armament, Washington, D. C., 1922, esp. 
932-940. 

Dennett, Tyler, Americans in Eastern Asia, New York, 1922. 

“Extraterritoriality in China,’’ Foreign Policy Association, Information 
Service, Series 1925-26, No. 6, December 18, 1925, 18 E. 41st Street, 
New York, N. Y. 

Heyking, A. de, L’Exterritorialité, second edition, Paris, 1926. 

Hinckley, F. E., American Consular Jurisdiction in the Orient, Washington, 
1906, 

Hyde, C. C., ‘Resolution of the Conference,” etc., A. J. I. L., XVI, 70-74. 

James, E. R., “Jurisdiction over Foreigners in Siam,” A. J. J. L., XVI, 
585-603. 

Koo, V. K. W., Status of Aliens in China, New York, 1912. 

Liu, Shih-shun, Extraterritoriality: Its Rise and Decline, (Columbia Uni- 
versity Studies, Vol. CX VIII, No. 2), New York, 1925. 

Lobingier, C. C., Extraterritorial Cases, 1, Manila, 1920; II, Shanghai, 1927. 

Mah, N. W., ‘Foreign Jurisdiction in China,” A. J. I. L., XVIII, 676-695. 

Morse, H. B., International Relations of the Chinese Empire (3 vols.), 
Shanghai, 1910-1918. 

Piggott, F., Exterritoriality, London, 1907. 

Quigley, H. S., “Extraterritoriality in China,” A. J. I. L., XX, 46-68. 

Report of the Commission on Extraterritoriality in China, Government 
Printing Office, Washington, D. C., 1926. Price 25 cents. 

Tyau, M. T. Z., ‘‘Extraterritoriality in China,” British Year Book of Inter- 
national Law, 1921, 133-149. 

Wang, Chung-hui, ‘Revision of the Chinese Criminal Code,’’ 13 Illinois 
Law Review, 219-223. 


[35] 


96 


Williams, B. H., ‘‘ Protection of American Citizens in China,” A. J. J. L., 
XVI, 43-58; 489-610. 

Willoughby, W. W., Foreign Rights and Interests in China, Baltimore, 1920. 

Woodhead, H. G. W., and Others, Occidental Interpretations of the Far 
Eastern Problem, Chicago, 1925. 


B. PoLiTicAL AND CONSTITUTIONAL DEVELOPMENT 
I. IMPERIAL POLITICS AND THE REVOLUTION OF IQII 


Dominant elements under the empire; monarchy: councils and boards; 
civil service based upon literary qualifications; ‘‘squeeze’’; nepotism; lack 
of separation of powers; excess of officials; actual provincial autonomy; 
strong local sentiment involved in the family system; light taxation. 

Reasons for the Revolution: the Empress Dowager; the radicals; Sun 
Yat-sen; the moderates; K’ang Yu-wei; Liang Ch’i-ch’ao; foreign conces- 
sions and provincial jealousy. 


II. EFFECTS OF THE REPUBLICAN REVOLUTION 


Establishment of a “‘ Provisional Constitution’’; imperfect attempt at a 
cabinet system; no provision regarding provincial government. 

Destruction of an ancient monarchy; absence of traditional centre of 
power; civil service on new basis. 

Rise of struggle between military and civilian forees—between tuchiin 
and parliament; the constitutionalists; Kuomintang; Chinputang; feder- 
alism; the tuchdin or tupan. 


Ill. ERA OF YUAN SHIH-K’AT (1914-1916) 


Yuan the heir of the greater viceroys; his character and methods; treat- 
ment of parliament; possibility of accommodation; influence of foreign 
loans. 

Yuan’s ‘‘Constitutional Compact”; his governing machinery; the mon- 
archy movement; death of Yuan. 


Iv. ‘‘NORTH’’ vs. ‘‘souTH’’ (1916-1924) 


Restoration of parliament; Li Yuan-hung; Tuan Ch’i-jui; issue of en- 
trance into the Great War; second dissolution of parliament. 

Break-up of China into autonomous regions; no united “North” or 
“South”’ in fact; peregrinations of parliament; revival of civil war; elec- 
tion of Sun Yat-sen as president of ‘‘South’”’ China; Sun vs. Ch’en. 

The military cliques: Peiyang; Anfu; Chihli; Fengtien; Paoting; Loy- 
ang; struggle for supremacy; President Hsii Shih-chang. 

Civilian cliques and pseudo-parties; Chiaotung clique; Yen Chiu-hsi; 
Cheng Hsueh-hui, etc. 

[ 36 J 


97 


V. THE LATEST PHASE (1924-1926) 


Rupture of the Chihli clique; Ts'’ao K’un, Wu Pei-fu and Feng Yu- 
hsiang vs. Chang Tso-lin; Ts’ao K’un elected president; the ‘‘ Permanent 
Constitution’’; outstanding features of the new constitution: federalism, 
national supremacy, cabinet government, judicial review: suspension of 
the constitution by Tuan Ch’i-jui; the new draft constitution. 

Alliance of Sun Yat-sen and Chang Tso-lin against the Chihli triumvi- 
rate; outbreak of civil war in 1924; treachery of Feng Yu-hsiang and rout 
of Wu Pei-fu; the ‘Little Emperor” ousted from the palace; Sun Yat-sen 
in Peking; his death there; Ts’ao K’un imprisoned and Tuan Ch’i-jui 
installed as provisional president; the ‘‘Reorganization Conference’’; 
the ‘‘Senate”’; the proposed ‘‘Citizens’ Conference.” 

Feng attempts to overthrow Chang Tso-lin in Manchuria, but fails; 
alliance of Wu Pei-fu and Chang Tso-lin; Feng driven out of Peking; dis- 
appearance of civil government in the capital; Wu and Chang on the 
teeter-board. 

The situation at Canton; charter government; Russian influence; con- 
quest of South. 

Possible tendencies toward provincial independence; meaning of inde- 
pendence as used by provincial or regional dictators; importance of Chinese 
cultural homogeneity; prospects for a ‘‘strong man”’; Is a ‘‘strong central 
government”’ essential in China? 


Bibliography 

Bau, M. J., Modern Democracy in China, Shanghai, 1923. 

Beltchenko, A. and Moran, E. E., Present Day Political Organization of 
China, Shanghai, 1912. 

Bland, J. O. P., Recent Events and Present Policies in China, Philadelphia, 
1912. 

Brown, A. J., The Chinese Revolution, New York, 1912. 

Cheng, S. G., Modern China, Oxford, 1919. 

China Year Books, Entire Series, 10 vols., Tientsin. Also Chicago Univer- 
sity Press. 

Chinese Social and Political Review, Peking, 1916 to date. (The best file 
for recent material on government and politics.) 

Current History, New York. (Monthly section on the Far East.) 

Farjenel, F., Through the Chinese Revolution, New York, 1916. 

Gilbert, Rodney, What's Wrong with China, London, 1926. 

Goodnow, F. J., China: An Analysis, Baltimore, 1926. 

Hornbeck, S. K., Contemporary Politics in the Far East, New York, 1916. 

Hsii Shih-chang, China After the War, Peking, 1920. 

King-Hall, S., Western Civilization and the Far East, New York, 1924. 

Li, C. S., Central and Local Finance in China, New York, 1922. 


[37] 


98 


Liang, Lone, ‘‘China’s New Constitution,’ Chinese Social and Political 
Science Review, January, 1926, 145-163; April, 1926, 509-541; Octo- 
ber, 1926, 775-802. 

Mayers, W. F., The Chinese Government, Shanghai, 1878. 

Morse, H. B., The Tradeand Administration of China, 3d ed., Shanghai, 1921. 

Quigley, H. S., ‘‘ Political System of Imperial China,” American Political 
Science Review, XVII, 551-567. 

Quigley, H. S., ‘‘SomeAspects of China’s Constitutional Problem,” Politi- 
cal Science Quarterly, XX XIX, 189-201. 

Quigley, H. S., ‘‘The Chinese Constitution,’ Chinese Social and Political 

f Science Review, IX, 88-98. 

Quigley, H. S., ‘‘The New Break-Up of China,” North American Review, 
Vol. 222, 102-112. 

Quigley, H. S., ‘‘Constitutional and Political Development in China Under 
the Republic,” Annals, CX XII, 8-15. 

Reinsch, P. S., Intellectual and Political Currents in the Far East, New 
York, I91I. 

Vinacke, H. M., Modern Constitutional Development in China, Princeton, 
1920. 

Weale, Putnam, The Fight for the Republic in China, New York, 1917. 

Willoughby, W. W., Constitutional Government in China, Pamphlet No. 47, 
Carnegie Endowment for International Peace, Division of Internation- 
al Law. 

Woodhead, H. G. W., The Truth About the Chinese Republic, London, 1926. 

Yui, S. and Quigley, H.S., ‘‘The Constitution of Hunan Province,’’ Chinese 
Social and Political Science Review V\I-2, 78-102. 


C. Economic CONDITIONS AND PROBLEMS 
I. MAJOR ECONOMIC GROUPS 


Conditions of the agricultural class; land-holding; effect of new ideas 
upon village life; influence of country gentry upon political affairs. 

Development of a labor movement; guilds and unions; strikes; use of the 
boycott; situation at Canton; relation of labor conditions to the military 
situation; child labor. 

Position of the merchant class; banking; manufacturing; mining; ship- 
ping; influence of commercial clubs; degree of independence shown toward 
military governors. 


II. FOREIGN TRADE AND INVESTMENT 


The Chinese customs service: establishment and importance of the 
inspectorate-general; British vs. Japanese claims to that office; deposit of 
customs funds. 


[38 ] 


99 


The Chinese tariff: limitations involved in the 5 per cent treaty rates as 
compared with tariffs of other countries. 

Development of Chinese commerce: trends; distribution among foreign 
countries; effort to develop port at Whampoa; possibilities of Tsingtao; 
effects of civil war upon commerce and internal trade; likin: nature and 
effects. 

Peking tariff conference: Chinese proposals; American and Japanese 
proposals; autonomy resolution; issue of loan security; likin issue; interim 
arrangements. 

Railways: types; how financed; foreign part in management; foreign 
investment in railways; American efforts to obtain railway concessions; 
the Hukuang lines; the Sianfu-Haichow line; depreciation suffered due to 
civil warfare. 

The Chinese Eastern Railway: original method of financing; interest of 
France; economic value of road; effect of loss of South Manchurian line 
upon its profits; status under new Sino-Soviet treaties. 

The Consortium: the apparent change of American policy; attitude of 
Japan; plans for loans; difficulties with the Chinese government and peo- 
ple; question of foreign participation in administration; possibilities of 
private loans; of cooperation with Chinese bankers; issue of security. 

Japan in Manchuria: extent of concessions for minerals; railway -conces- 
sions; new railways under construction or contemplated; soya beans; oil 
manufacture; Chinese immigration. 

Other foreign investments: mines; manufactures; growth of Japanese 
cotton mills in China; river and coastal shipping; banks; papers; trade 
branches. . 

III. LOANS 


Extent and character of Chinese-foreign loans; extent of domestic loans; 
how far secured; outstanding unsecured loans; nature of security for for- 
eign loans; outlook for additional security; desirability of further loans. 

Defaulted loans; Nishihara loans; American bankers’ loans. 

Sources of Chinese revenue; relation of revenue to budget requirements; 
possibilities of increase. 

Plans for funding unsecured obligations; prospects for a reorganization 
of Chinese finances. 


Bibliography 


Annals of American Academy of Political and Social Science, CX XII, 1925. 

Arnold, Julean, Commercial Handbook of China, 2d ed., 1927. 

China Year Books. (Most important source.) 

“Chinese Eastern Railway, The,” Foreign Policy oe Information 
Service, Vol. II, No, 1, February 27, 1926, 


[39 ] 


100 


“Chinese Tariff Conference, The,” Foreign Policy Association, Informa- 
tion Service, Series 1925-26, No. 2, October 24, 1925. 

Collins, W. F., Mineral Enterprise in China, 2d ed., Tientsin, 1922. 

Conference on the Limitation of Armament, esp. 324ff, 874ff, 1272ff, 1512ff. 

Consortium, The, Pamphlet No. 40, Carnegie Endowment for International 
Peace, Division of International Law. 

Current History, (Monthly section on Far East). 

Goodnow, F. J., China: An Analysis, Chap. II. 

Kent, P. H., Railway Enterprise in China, London, 1907. 

Kinnosuke, A®* Manchuria: A Survey, New York, 1925. 

Leith, C. K., ‘‘Mineral Resources of Far East,” Foreign Affairs, IV, 433- 
443. 

MacMurray, J. V. A., ‘“‘Problems of Foreign Capital in China,” Foreign 
Affairs, III, 411-423. 

Malone, C. B.: Taylor, J. B., ‘‘Study of Chinese Rural Economy,” 
Chinese Social and Political Science Review, Vi1-4, 88-102; VIII-1, 
196-227; VIII-2, 230-263. 

Mallory, Walter, China, Land of Famine, American Geographical Society, 
New York, 1926. 

Morse, H. B., Trade and Administration of China. 

Overlach, T. W., Foreign Financial Control in China, New York, 1919. 

Padoux, G., Consolidation of China's Unsecured Indebtedness, Peking, 1925. 

Sargent, A. J., Amglo-Chinese Commerce and Diplomacy, Oxford, 1907. 

See, C. S., Foreign Trade of China, (Columbia University Studies, Vol. 
LXXXVII), New York, 1919. 

Sun Yat-sen, International Development of China, New York, 1922. 

Willoughby, W. W., Foreign Rights and Interests in China. 

Woodhead, H. G. W., and Others, Occidental Interpretations of the Far 
Eastern Problem, Chapter by Julean Arnold. 


D. INTERNATIONAL RELATIONS OF CHINA 
I. PHASES IN SINO-FOREIGN RELATIONS 


Period of conflict: reasons for Chinese opposition to a intercourse 
with foreigners. 

Period of submission: losses of territory; unilateral treaties; establish- 
ment of foreign control over various services. 

Period of foreign domination: foreign garrisons; indemnities; leases and 
spheres; danger of break-up. 

Period of nationalism: ideas of democracy; the ‘‘renaissance’’; demands 
for treaty revision; boycotts; anti-foreignism; regional demands for 
recognition. 


[ 40 ] 


IOI 


II. CHINA AND JAPAN 


Earlier Japanese dependence upon Chinese culture; quicker comprehen- 
sion of ultimate results of forced relations with West; failure to propose a 
joint policy of defence; decision for imperialism at China’s expense; the 
Sino-Japanese war; absorption of Korea. 

The Anglo-Japanese alliance; Russo-Japanese war; acquisition of leases 
of Kwantung, the South Manchurian railway and natural resources of 
South Manchuria; fate of the open door doctrine in South Manchuria; 
accommodation with Russia. 

Twenty-one Demands; Japan’s ‘‘ Monroe Doctrine for Asia’’; the Secret 
Treaties; Shantung settlement at Versailles; its reversal at Washington. 

Militarism vs. economic penetration; policy of conciliation; recent 
Russo-Japanese relations in Manchuria; railways, coal, iron, and beans. 

Japan at the Tariff Conference; views on abolition of extraterritoriality; 


favorable attitude toward treaty revision; possibilities of a Far Eastern 
Pbloc.s 


III. CHINA AND RUSSIA 


Extent of common boundary; influence of Mongol blood toward common 
understanding; relative indifference of China in earlier periods to Mongolia 
and Manchuria; tripartite treaty. 

Russian territorial gains at China’s expense: Siberia; maritime province; 
Ili; Russian railway concessions in Manchuria; scope of Russian railway 
designs; administration of railway zones; Russia’s application of the open 
door doctrine. 

The Russo-Asiatic bank: railway and bank politics. 

China and the Union of Socialist Soviet Republics: delay in recognition; 
Soviet manifestoes surrendering treaty rights; disposition of Russian share 
of Boxer indemnity; treaties of 1924; Ambassador Karakhan; Soviet tac- 
tics vs. the ‘‘imperialistic’’ powers; Chinese friendship for the Soviets; the 
Chinese Eastern Railway; Mongolia; attitude of Chang Tso-lin. 


Iv. CHINA AND GREAT BRITAIN 


Importance of British part in establishing treaty relations; Hongkong; 
British spheres of interest; Wei-hai-wei; railways; mines; customs inspec- 
torate; salt; trade; Chinese feeling toward the British. 

British attitude at the Washington Conference; subsequent attitude 
_ respecting extraterritoriality and the tariff régime; views of British mis- 
- sionaries; British editors in China. 

The “Shanghai” case: report of commission of inquiry; later proposals 
regarding Chinese representation on the municipal council; situation in 
Hongkong and Canton; status of British trade and investments. 


C41] 


102 


British participation in the Peking Tariff Conference and the work of the 
extraterritoriality commission; disposition of British share of Boxer 
indemnity. 


The problem of Tibet. 


Vv. CHINA AND THE UNITED STATES 


Importance of the open door doctrine and the ‘‘integrity’’ policy to 
China; resulting development of American trade; disappointment of China 
at American interpretations of responsibility; attitude of the United States 
respecting Manchuria. 

American missionaries: educational and medical work in China; in- 
fluence upon American policy of the groups therein represented; the Boxer 
indemnity. 

The ‘‘Shantung Question”’ in Sino-American relations; settlement at 
Washington; the Washington Conference and American policy in general. 

American part in bringing Washington Conference treaties into effect; 
proposals at the Peking Tariff Conference. 

American cooperation with other powers the major desideratum; the 
Taku incident. 


VI. CHINA AND FRANCE 


French influence and interests in South China; in the Chinese Eastern 
Railway; missionary relations; trade; failure of the Banque Industrielle 
de la Chine. 

France at the Washington Conference; the ‘‘Gold Franc’’ case; disposi- 
tion of French share of Boxer indemnity. 

France and the ‘‘Shanghai”’ case. 

Participation of France in tariff and extraterritoriality investigations. 


VII. CHINA AND GERMANY 


German policy in Kiao-chao; friendly attitude of the Chinese toward the 
Germans; deportations forced by the powers; loss of concessions and other 
treaty rights. j 

Post-war revival of German trade; basis of present Sino-German 
relations. 


VIII. CHINA AND THE LEAGUE OF NATIONS 


Membership in the Council; loss of membership; efforts toward reinstate- 
ment; classification for contribution to budget; arrears; re-election in 1926. 
The League and the opium traffic: conferences of 1924-5; withdrawal 
of the Chinese and American delegations; new Indian policy of restriction. 


[42] 


103 


Chinese participation in the International Labor Organization; in the 
Permanent Court of International Justice. 

The proposed plan of League assistance toward Chinese financial reor- 
ganization; hostile attitude of the Chinese. 


Bibliography 


American Relations with China, Report of Baltimore Conference, 1925. 

American Year Book, 1926; 1927. 

Bau, M. J., The Foreign Relations of China, New York, 1921. 

Blakeslee, G. H., The Recent Foreign Policy of the United States, New York, 
1925. 

Buell, R. L., The Washington Conference, New York, 1922. 

Chen, Ta., Chinese Migrations, Washington, 1923. 

China Year Books. 

Conference on the Limitation of Armament, International Conciliation 
pamphlets, Nos. 169 and 172. 

Croly, Herbert, Willard Straight, New York, 1924. 

Current History, (Monthly section on the Far East). 

Dennett, Tyler, Americans in Eastern Asia. 

Dennett, Tyler, Roosevelt and the Russo-Japanese War, New York, 1925. 

Dennis, A. L. P., The Foreign Policies of Soviet Russia, New York, 1924. 

Douglas, R. K., Europe and the Far East, New York, 1913. 

Driault, E., La Question d’Extreme Orient, Paris, 1908. 

Foreign Troops and Warships in China, Foreign Policy Association, Series 
1925-26, No. 7, New York, January 9, 1926. 

Francke, Otto, Die Grossmdchte in Ostasien, Hamburg, 1923. 

Harris, N. D., Europe and the East, New York, 1926. 

Hornbeck, S. K., Contemporary Politics in the Far East. 

Hsia, C. L., Studies in Chinese Diplomatic History, Shanghai, 1924. 

Institute of Pacific Relations Report, Honolulu, 1925. 

King-Hall, Stephen, Western Civilization and the Far East. 

Korea, Pamphlet No. 43, Carnegie Endowment for International Peace, 
Division of International Law. 

MacMurray, S. V. A., Treaties and Agreements with and concerning China, 
1894-1919, 2 Vols., New York, 1921. 

MacNair, H. F., The Chinese Abroad, Shanghai, 1925. 

Manchuria, Pamphlet No. 44, Carnegie Endowment for International 
Peace, Division of International Law. 

Millard, T. F., Our Eastern Question, New York, 1916. 

Morse, H. B., International Relations of the Chinese Empire. 

Pasvolsky, L., Russia in The Far East, New York, 1922. 

Reinsch, P. S., An American Diplomat in China, Garden City, 1922. 


[43 J 


104 


Shaniung, Pamphlet No. 42, Carnegie Endowment for International 

Peace, Division of International Law. 
_ Sino-Japanese Negotiations of 1915, Pamphlet No. 45, Carnegie Endow- © 

ment for International Peace, Division of International Law. 

Soothill, W. E., China and the West, Oxford, 1925. 

Soyeshima, M.and Kuo, P. W., Oriental Interpretations of the Far Eastern 
Problem, Chicago, 1925. 

Sze, S. K. Alfred, Addresses, Baltimore, 1926. 

Tyau, M. T. Z., Treaty Obligations Between China and Other States, Shang- 
hai, 1917. 

Weale, Putnam, Why China Sees Red, New York, 1925. 

Williams, E. T., China Yesterday and To-day, New York, 1923. 

Willoughby, W. W., Foreign Rights and Inierests in China. 

Willoughby, W. W., China at the Conference, Baltimore, 1922. 

Willoughby, W. W., Opium as an International Problem, Baltimore, 1925. - 

Woodhead, H. G. W., and Others, Occidental Interpretations of the Far 
Easiern Problem. 

Yen, E. T., The Open Door Policy, Boston, 1923. 


REFERENCES FOR THE GENERAL READER! 
Periodicals 
Those interested in following developments in China will find helpful — 
material in Current History, New York, (The Historians’ Chronicle of the 
World and special articles); the China Weekly Review, Shanghai; the North 
China Herald, Shanghai, (weekly); Peking Leader, Peking, (Review of the” 
Week’s News); the Literary Digest, New York; the Nation, New York. 
Further articles will be found in issues of the Contemporary Review, London; 
the Asiatic Review, London; Chinese Social and Political Science Review, 
Peking; Asia, New York; Foreign Affairs, New York, (quarterly). 
Organizations 
China Institute in America, 2 West 45th Street, New York, N. Y. 
China Society of America, 19 West 44th Street, New York, N. Y. 
Foreign Policy Association, Information Service, 18 East 41st Street, 
New York, N. Y. 
Institute of Pacific Relations, J. Merle Davis, General Secretary, Honolulu, 
Hawaii. (Described in International Conciliation, No. 218, March, 
1926. Issues excellent news letters and bulletins). ‘ 


Books and Pamphlets 
Buell, Raymond Leslie, Problems of the Pacific, (China), A Bibliography, 
World Peace Foundation, Vol. VIII, 1925, pamphlet No. 1. Also 
International Conciliation, No. 218, March, 1926. 


1 By Amy Heminway Jones, Division Assistant. 


[44] 


105 


China Year Book, Chicago University Press, Chicago. 
Dutcher, George Matthew, The Political Awakening of the East, ‘‘China,”’ 
pp. 112-172, Abingdon Press, 1925. 
Latourette, Kenneth Scott, China Under the Republic, Syllabus No. IX, 
International Relations Clubs, Carnegie Endowment, 1921. Supple- 
ment to Syllabus No. IX, 1925. 
Ross, E. A., The Changing Chinese, The Century Company, 1911. 


While books of romance and travel must not be taken too literally, they 
frequently give interesting personal impressions of a country and some of 
the more recent of such books on China are listed below: 


Ayscough, Florence, The Autobiography of a Chinese Dog, Houghton- 
Mifflin Company, Boston, 1926. 
Cooper, Elizabeth, My Lady of the Chinese Courtyard, Stokes, 1926. 
_ Hobart, Alice Tisdale, By the City of the Long Sand, Macmillan Company, 
1926. 
Howard, Dr. Harvey J., Ten Weeks with Chinese Bandits. An account of 
| the harrowing experiences of an American physician in captivity in 
| the wilds of Manchuria in 1925. Dodd, Mead & Co. 
Miln, Louise Jordan, In a Shantung Garden, Stokes, 1924; Ruben and 
: Ivy Sen, Stokes, 1925; The Soul of China, 1925; It Happened in Peking, 
| Stokes, 1926. 

Morrill, Samuel, Lanterns, Junks and Jade, Stokes, 1926. 
Be peakman, Harold, Beyond Shanghai, Abingdon Press, 1922. 

Van Vorst, B. A., A Girl from China, Stokes, 1926. 


NOTE 


The following letter, dated December 22, 1926, has been received from 
J. Merle Davis, Executive Secretary, Institute of Pacific Relations, Hon- 
olulu, Hawaii: 

I wish to call your attention to a serious error of statement con- 
tained in the Preface of the International Conciliation Series 
pamphlet of March, 1926. On page 5, in the late Judge Thomas 
Burke’s speech describing the Institute of Pacific Relations which 
met in Honolulu, in July, 1925, the following words appear, “‘At 
one time it seemed as if the Chinese representatives had made up 
their minds to withdraw from the conference, but on more careful 
consideration they did not do so.”” The word, ‘‘Chinese,”’ in this 
sentence is an error and should be corrected to read, ‘‘ Japanese.” 

Since at your request I read the proof of this pamphlet before 
going to press, I feel a measure of responsibility for the above- 
mentioned error and will be grateful if you can give this statement 
a prominent place in an early issue, in order that justice may be 
accorded our Chinese Institute members, 


[45 ] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, 1907 to No. ro9, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will sent upon 
“aaa to International Conciliation, 405 West rr7th Street, New York 

ty. 

212. European Security: Address by Dr. Edward Bene, Czechoslovak Foreign 
Minister, at Prague, April 1, 1925; Address by Mr. Austen interes 
— British Foreign Minister, at Geneva, March 12, 1925; — to 
Chamberlain's Address by Mr. J. Ramsay MacDonald, Former 
ey Prime Minister, April ro, 1925. 
September, 7925. 
213. The United States and the System of Mandates, by Walter Russell Bat- 
sell, M.A., Director of the Reference Service on International Affairs of 
the American Library in Paris. Information Regarding the Mandate 


System. 
October, 1925. 
214. The Advisory Opinions of the Permanent Court of International Justice 
by Manley O. Hudson, Bemis Professor of International Law, Har- 


vard Law School. 
November, 1025. 

215. The Trend of Economic Restoration since the Dawes Reparation Settle- 
ment, by E. G. Burland, Member of the Staff of the American Section 
of the International Chamber of Commerce. 

December, 1925. 

216. Final Protocol of the Locarno Conference, ro25, and Treaties between 

France and Poland and France and Czechoslovakia. 
January, 1926. 

217. Peasant Conditions in Russia, 1925, by Jean Efremoff, Former Minister 

of Justice = the Provisional Government of Russia. "4 
February, ro 

218. = lastitute S Pacific Relations, by J. Merle Davis, General Secretary. 
arch, 1926. 

29. The Fourth Vear of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, 

Law School. 
April, 1926. 

220. Disarmament and American Foreign Policy. Articles by James T-. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 
berlain. 

May, 1926. : a 

221. Treaty-Makinge Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 

June, 1926. 

222. The Problem of Minorities. Articles by Louis Hisenmann, William E. 

Rappard, H. Wilson Harris and Raymond Leslie Buell. 
September, 1926. 

223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 

in the Goverument of Italy. Recent Legislation in Italy. 
October, 1026. 

224. An Alternative Use of Force: When te Earth Trembled, by Richard 

J. Walsh; The Moral Equivalent of War, by William James. 
November, "1926. 

z235. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 

Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 7026. : . 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

January, 1927. 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 

Recent Chinese Politics and Diplomacy. 
February, 1927. 
[46] 


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INTERNATIONAL CONCILIATION 
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CONTENTS 


Page 
IPARTOIR ACID!" no 1 ey iyereet ae tha Ot Eke ier meee anne eee RL DL 7 
REPORT OF INTER-IMPERIAL RELATIONS COMMITTEE 
INTRODUCTION ... . sae SH Gg cence 9 
STATUS OF GREAT BRITAIN AND THE DOMINIONS .... . 9 
SPECIAL POSITION OF INDIA ... . 4 10 
RELATIONS BETWEEN THE VARIOUS PARTS OF THE BRITISH 
EMPIRE 
a. The Title of His Majesty the King. ....... #II 
b. Position of Governors-General. . ........ £4212 
c. Operation of Dominion Legislation. ....... £13 
d. Merchant Shipping Legislation. . . . 15 
e. Appeals to the weet Committee of the Pay 
Comme eee. ba a Bae Sant on nee OD 
RELATIONS WITH FOREIGN COUNTRIES .........- 17 
a. Procedure in Relation to Treaties .. . Eales 18 
b. Representation at International @ontereneee CN eA ee 
c. General Conduct of Foreign Policy. . . . 23 
d. Issue of Exequaturs to Foreign Consuls in the Do- 
minions ... : tetany G0 eye) 
e. Channel of Copeanicition Geen Dominion 
Governments and Foreign Governments ..... 24 
SYSTEM OF COMMUNICATION AND CONSULTATION ..... 25 
PARTICULAR ASPECTS OF FOREIGN RELATIONS DISCUSSED 
BY COMMITTEE... . apo 
a. Compulsory meereation i in ie cere tional Dignuess ele: 
b. Adherence of the United States of America to the 
Protocol establishing the Permanent Court of Inter- 
MALIONalaUStiCem Meena) gy 2) Gal ia le ha Sa 
Gane Lolicy Of EOCARNOW Ml soso oc ak a +k Se eo 
APPENDIX: SPECIMEN FORM OF TREATY. ..... . Se 27h 
THE Empire As IT Is, Editorial in the London Times, ae 
EBM S OY DAP MOP Sede Gris yt a ch ole gee cee renee an mm meamn RSNA PoRtE 6210 


ADDRESS BY THE RT. HON. STANLEY MELBOURNE BRUCE, 
NEW) YORK), DECEMBER) 20; 1026). . 3.60 6 2s ew 38 


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109 


PREFACE 


The Ninth Imperial Conference representing the various parts 
of the British Commonwealth of Nations opened in London on 
October 19, 1926. Each of the six self-governing Dominions was 
represented by its Premier and there was a delegation from India 
including the Maharaja of Burdwan and the Earl of Birkenhead, 
Secretary of State for India. Committees were appointed to investi- 
gate and report upon specific questions. All the questions on the 
Agenda affecting Inter-Imperial relations were referred by the Con- 
ference to a Committee of Prime Ministers and Heads of Delegations 
of which Lord Balfour was invited to be Chairman. The Members 
of the Committee included the Prime Ministers of Canada, of the 
| Commonwealth of Australia, of New Zealand, of the Union of South 
: Africa, and of Newfoundland, the Vice-President of the Executive 
Council of the Irish Free State, the Secretary of State for Foreign 
Affairs, and the Secretary of State for Dominion Affairs. Other 
Ministers and members of the Conference were invited to attend for 
the consideration of certain particular questions. 

The Report of this Committee was adopted by the Conference by 
unanimous vote on November 19. In view of its vital importance 
not only to the British Empire, as it has heretofore existed, but 
|to the whole world, the full text is reproduced in this document 
together with the editorial comment upon it appearing in the London 
| Times of November 22. A permanent record is made through this 
'report of facts and conditions within the British Empire which had 
been developing for several decades and which were greatly ac- 
‘celerated by the World War. The making of this record may per- 
haps be called the coming of age of the British Dominions. 

Students of Constitutional History and Law will see in this docu- 
ment another fundamental and massive contribution to the prog- 
ress of the movement for the establishment and organization of 
liberty among those English-speaking peoples that are gathered in 
the British Commonwealth of Nations. This document takes its 
place in the long procession of epoch-making acts and papers which 
may be said to begin with Magna Charta. 


[7] 


IIo 


On December 29, 1926, at a dinner given in New York by the} 
Pilgrims of the United States, in honor of the Rt. Hon. Stanlegs 
Melbourne Bruce, Prime Minister of Australia, this distinguishedll 
statesman delivered a notable address on the development of the 
British Empire and its relations to the United States of America, 
This address by the representative of Australia to the Ninth Im- 
perial Conference of the British Commonwealth will be of interest 
and value to our readers. It is the second part of the following 
document. 


NicHoLAS Murray BUTLER 


New York, February 1, 1927. 


[8] 


REPORT OF INTER-IMPERIAL RELATIONS COMMITTEE 


[Reprinted from Imperial Conference, 1926, 
Summary of Proceedings, Cmd. 2768.] 


I. INTRODUCTION 


We were appointed at the meeting of the Imperial Conference on 
the 25th October, 1926, to investigate all the questions on the Agenda 
affecting Inter-Imperial Relations. Our discussions on these ques- 
tions have been long and intricate. We found, on examination, 
that they involved consideration of fundamental principles affecting 
the relations of the various parts of the British Empire inter se, 
as well as the relations of each part to foreign countries. For such 
examination the time at our disposal has been all too short. Yet we 
hope that we may have laid a foundation on which subsequent 
Conferences may build. 


Il. Srarus oF GREAT BRITAIN AND THE DOMINIONS 


The Committee are of opinion that nothing would be gained by 
attempting to lay down a Constitution for the British Empire. Its 
widely scattered parts have very different characteristics, very 
| different histories, and are at very different stages of evolution; 
while, considered as a whole, it defies classification and bears no real 
| resemblance to any other political organization which now exists 
| or has ever yet been tried. 
__ There is, however, one most important element in it which, from 
a strictly constitutional point of view, has now, as regards all vital 
| matters, reached its full development—we refer to the group of self- 
| governing communities composed of Great Britain and the Domin- 
ions. Their position and mutual relation may be readily defined. 
They are autonomous Communities within the British Empire, equal 
in status, in no way subordinate one to another in any aspect of their 
domestic or external affairs, though united by a common allegiance to 
the Crown, and freely associated as members of the British Common- 
| wealth of Nations. 

A foreigner endeavouring to understand the true character of 
the British Empire by the aid of this formula alone would be tempted 


[oJ] 


II2 


to think that it was devised rather to make mutual interference 
impossible than to make mutual cooperation easy. 

Such a criticism, however, completely ignores the historic situa- 
tion. The rapid evolution of the Oversea Dominions during the 
last fifty years has involved many complicated adjustments of old 
political machinery to changing conditions. The tendency towards 
equalty of status was both right and inevitable. Geographical and 
other conditions made this impossible of attainment by the way of 
federation. The only alternative was by the way of autonomy; 
and along this road it has been steadily sought. Every self-govern- 
ing member of the Empire is now the master of its destiny. In fact, 
if not always in form, it is subject to no compulsion whatever. 

But no account, however accurate, of the negative relations in 
which Great Britain and the Dominions stand to each other can do 
more than express a portion of the truth. The British Empire is” 
not founded upon negations. It depends essentially, if not formally, : 
on positive ideals. Free institutions are its life-blood. Free co-— 
operation is its instrument. Peace, security, and progress are among 
its objects. Aspects of all these great themes have been discussed | 
at the present Conference; excellent results have been thereby ob- 
tained. And though every Dominion is now, and must always re-| 
main, the sole judge of the nature and extent of its cooperation, no. 
common cause will, in our opinion, be thereby imperilled. , 

Equality of status, so far as Britain and the Dominions are con- 
cerned, is thus the root principle governing our Inter-Imperial Re-— 
lations. But the principles of equality and similarity, appropriate 
to status, do not universally extend to function. Here we require 
something more than immutable dogmas. For example, to deal 
with questions of diplomacy and questions of defence, we require 
also flexible machinery—machinery which can, from time to time, 
be adapted to the changing circumstances of the world. This sub- 
ject also has occupied our attention. The rest of this report will | 
show how we have endeavoured not only to state political theory | 
but to apply it to our common needs. 


III. SprcraL Position or INDIA 


It will be noted that in the previous paragraphs we have made | 
no mention of India. Our reason for limiting their scope to Great | 
Britain and the Dominions is that the position of India in the Empire | 


[10 ] 


113 


is already defined by the Government of India Act, 1919. We 
would, nevertheless, recall that by Resolution IX of the Imperial 
War Conference, 1917, due recognition was given to the important 
position held by India in the British Commonwealth. Where, in 
this Report, we have had occasion to consider the position of India, 
we have made particular reference to it. 


IV. RELATIONS BETWEEN THE VARIOUS PARTS OF THE BRITISH 
EMPIRE 


Existing administrative, legislative, and judicial forms are ad- 
mittedly not wholly in accord with the position as described in Sec- 
tion II of this Report. This is inevitable, since most of these forms 
date back to a time well antecedent to the present stage of consti- 
tutional development. Our first task then was to examine these 
forms with special reference to any cases where the want of adapta- 
tion of practice to principle caused, or might be thought to cause, 
inconvenience in the conduct of Inter-Imperial Relations. 


(a.) The Title of His Majesty the King 


The title of His Majesty the King is of special importance and 
concern to all parts of His Majesty’s Dominions. Twice within 
‘the last 50 years has the Royal Title been altered to suit changed 
conditions and constitutional developments. 

The present title, which is that proclaimed under the Royal Titles 
Act of 1901, is as follows: 

“George V, by the Grace of God, of the United Kingdom of 

Great Britain and Ireland and of the British Dominions be- 

yond the Seas King, Defender of the Faith, Emperor of India.” 


Some time before the Conference met, it had been recognized that 
this form of title hardly accorded with the altered state of affairs 
arising from the establishment of the Irish Free State as a Dominion. 
It had further been ascertained that it would be in accordance with 
His Majesty’s wishes that any recommendation for change should 
be submitted to him as the result of discussion at the Conference. 

We are unanimously of opinion that a slight change is desirable, 
and we recommend that, subject to His Majesty’s approval, the 
necessary legislative action should be taken to secure that His Majes- 

' ty’s title should henceforward read: 


[ir] 


114 


“George V, by the Grace of God, of Great Britain, Ireland, 
and the British Dominions beyond the Seas King, Defender of 
the Faith, Emperor of India.” 


(b.) Position of Governors-General 


We proceeded to consider whether it was desirable formally to 
place on record a definition of the position held by the Governor- 
General* as His Majesty’s representative in the Dominions. That 
position, though now generally well recognized, undoubtedly repre- 
sents a development from an earlier stage when the Governor- 
General was appointed solely on the advice of His Majesty’s Ministers 
in London and acted also as their representative. 

In our opinion it is an essential consequence of the equality of 
status existing among the members of the British Commonwealth 
of Nations that the Governor-General of a Dominion is the represen- 
tative of the Crown, holding in all essential respects the same posi- 
tion in relation to the administration of public affairs in the Domin- 
ion as is held by His Majesty the King in Great Britain, and that 
he is not the representative or agent of His Majesty’s Government 
in Great Britain or of any Department of that Government. 

It seemed to us to follow that the practice whereby the Governor- 
General of a Dominion is the formal official channel of communica- 
tion between His Majesty’s Government in Great Britain and His 
Governments in the Dominions might be regarded as no longer 
wholly in accordance with the constitutional position of the Gov- 
ernor-General. It was thought that the recognized official channel 
of communication should be, in future, between Government and 
Government direct. The representatives of Great Britain readily 
recognized that the existing procedure might be open to criticism 
and accepted the proposed change in principle in relation to any of 
the Dominions which desired it. Details were left for settlement as 
soon as possible after the Conference had completed its work, but 
it was recognized by the Committee, as an essential feature of any 
change or development in the channels of communication, that a 
Governor-General should be supplied with copies of all documents of 
importance and in general should be kept as fully informed as is His 
Majesty the King in Great Britain of Cabinet business and public 
affairs. 


*The Governor of Newfoundland is in the same position as the Governor-General of a 
Dominion. 
[12] 


115 


(c.) Operation of Dominion Legislation 


Our attention was also called to various points in connection with 
the operation of Dominion legislation, which, it was suggested, 
required clarification. 

The particular points involved were: 

(a.) The present practice under which Acts of the Dominion Parlia- 
ments are sent each year to London, and it is intimated, through 
the Secretary of State for Dominion Affairs, that ‘‘ His Majesty 
will not be advised to exercise his powers of disallowance” 
with regard to them. 

(b.).The reservation of Dominion legislation, in certain circum- 
stances, for the signification of His Majesty’s pleasure which 
is signified on advice tendered by His Majesty’s Government 
in Great Britain. 

(c.) The difference between the legislative competence of the Parlia- 
ment at Westminster and of the Dominion Parliaments in that 
Acts passed by the latter operate, as a general rule, only within 
the territorial area of the Dominion concerned. 

(d.) The operation of legislation passed by the Parliament at West- 
minster in relation to the Dominions. In this connection special 
attention was called to such Statutes as the Colonial Laws 
Validity Act. It was suggested that in future uniformity of 
legislation as between Great Britain and the Dominions could 
best be secured by the enactment of reciprocal Statutes based 
upon consultation and agreement. 


We gave these matters the best consideration possible in the limited 
time at our disposal, but came to the conclusion that the issues in- 
volved were so complex that there would be grave danger in attempt- 
ing any immediate pronouncement other than a statement of certain 
principles which, in our opinion, underlie the whole question of the 
operation of Dominion legislation. We felt that, for the rest, it 
would be necessary to obtain expert guidance as a preliminary to 
further consideration by His Majesty’s Governments in Great Brit- 
ain and the Dominions. 

On the questions raised with regard to disallowance and reserva- 
tion of Dominion legislation, it was explained by the Irish Free 
State representatives that they desired to elucidate the constitu- 
tional practice in relation to Canada, since it is provided by Article 


Desa 


116 


2 of the Articles of Agreement for a Treaty of 1921 that ‘‘the position 
of the Irish Free State in relation to the Imperial Parliament and 
Government and otherwise shall be that of the Dominion of Canada.”’ 

On this point we propose that it should be placed on record that, 
apart from provisions embodied in constitutions or in specific stat- 
utes expressly provided for reservation, it is recognised that it is 
the right of the Government of each Dominion to advise the Crown 
in all matters relating to its own affairs. Consequently, it would 
not be in accordance with constitutional practice for advice to be 
tendered to His Majesty by His Majesty’s Government in Great 
Britain in any matter appertaining to the affairs of a Dominion 
against the views of the Government of that Dominion. 

The appropriate procedure with regard to projected legislation 
in one of the self-governing parts of the Empire which may affect 
the interests of other self-governing parts is previous consultation 
between His Majesty’s Ministers in the several parts concerned. 

On the question raised with regard to the legislative competence 
of Members of the British Commonwealth of Nations other than 
Great Britain, and in particular to the desirability of those Members 
being enabled to legislate with extraterritorial effect, we think 
that it should similarly be placed on record that the constitutional 
practice is that legislation by the Parliament at Westminster apply- 
ing to a Dominion would only be passed with the consent of the Do- 
minion concerned. 

As already indicated, however, we are of opinion that there are 
points arising out of these considerations, and in the application of 
these general principles, which will require detailed examination, 
and we accordingly recommend that steps should be taken by Great 
Britain and the Dominions to set up a Committee with terms of 
reference on the following lines: 

“To enquire into, report upon, and make recommendations 
concerning— 

(i.) Existing statutory provisions requiring reservation of Do- 
minion legislation for the assent of His Majesty or authorising 
the disallowance of such legislation. 

(ii.) (a) The present position as to the competence of Dominion 
Parliaments to give their legislation extraterritorial operation. 
(6) The practicability and most convenient method of giving 
effect to the principle that each Dominion Parliament should 


[14] 


ee 


117 


have power to give extraterritorial operation to its legislation 
in all cases where such operation is ancillary to provision for 
the peace, order and good government of the Dominion. 

(iii.) The principles embodied in or underlying the Colonial Laws 
Validity Act, 1865, and the extent to which any provisions of 
that Act ought to be repealed, amended or modified in the 
light of the existing relations between the various members of 
the British Commonwealth of Nations as described in this 
Report.”’ 


(d.) Merchant Shipping Legislation 


Somewhat similar considerations to those set out above governed 
our attitude towards a similar, though a special, question raised in 
relation to Merchant Shipping Legislation. On this subject it was 
pointed out that, while uniformity of administrative practice was 
desirable, and indeed essential, as regards the Merchant Shipping 
Legislation of the various parts of the Empire, it was difficult to 
reconcile the application, in their present form, of certain provisions 
of the principal Statute relating to Merchant Shipping, viz., the 
Merchant Shipping Act of 1894, more particularly clauses 735 and 
736, with the constitutional status of the several members of the 
British Commonwealth of Nations. 

In this case also we felt that although, in the evolution of the 
British Empire, certain inequalities had been allowed to remain as 
regards various questions of maritime affairs, it was essential in deal- 
ing with these inequalities to consider the practical aspects of the 
matter. The difficulties in the way of introducing any immediate 
alterations in the Merchant Shipping Code (which dealt, amongst 
other matters, with the registration of British ships all over the world), 
were fully appreciated and it was felt to be necessary, in any review 
of the position, to take into account such matters of general con- 
cern as the qualifications for registry as a British ship, the status of 
British ships in war, the work done by His Majesty’s Consuls in 
the interest of British shipping and seamen, and the question of 
Naval Courts at foreign ports to deal with crimes and offences on 
British ships abroad. 

We came finally to the conclusion that, following a precedent 
which had been found useful on previous occasions, the general 
question of Merchant Shipping Legislation had best be remitted 


[15] 


118 


to a special Sub-Conference, which could meet most appropriately 
at the same time as the Expert Committee, to which reference is 
made above. We thought that this special Sub-Conference should 
be invited to advise on the following general lines: 


“To consider and report on the principles which should 
govern, in the general interest, the practice and legislation 
relating to merchant shipping in the various parts of the Empire, 
having regard to the change in constitutional status and general 
relations which has occurred since existing laws were enacted.”’ 
We took note that the representatives of India particularly de- 

sired that India, in view of the importance of her shipping interests, 
should be given an opportunity of being represented at the proposed 
Sub-Conference. We felt that the full representation of India on an 
equal footing with Great Britain and the Dominions would not 
only be welcomed, but could very properly be given, due regard 
being had to the special constitutional position of India as explained 
in Section III of this Report. 


(e.) Appeals to the Judicial Committee of the Privy Council 


Another matter which we discussed, in which a general consti- 
tutional principle was raised, concerned the conditions governing 
appeals from judgments in the Dominions to the Judicial Commit- 
tee of the Privy Council. From these discussions it became clear 
that it was no part of the policy of His Majesty’s Government in 
Great Britain that questions affecting judicial appeals should be 
determined otherwise than in accordance with the wishes of the 
part of the Empire primarily affected. It was, however, generally 
recognised that where changes in the existing system were proposed 
which, while primarily affecting one part, raised issues in which 
other parts were also concerned, such changes ought only to be 
carried out after consultation and discussion. 

So far as the work of the Committee was concerned, this general 
understanding expressed all that was required. The question of 
some immediate change in the present conditions governing appeals 
from the Irish Free State was not pressed in relation to the present 
Conference, though it was made clear that the right was reserved 
to bring up the matter again at the next Imperial Conference for 
discussion in relation to the facts of this particular case. 


[16 ] 


119 
V. RELATIONS WITH FOREIGN COUNTRIES 


From questions specially concerning the relations of the various 
parts of the British Empire with one another, we naturally turned 
to those affecting their relations with foreign countries. In the latter 
sphere, a beginning had been made towards making clear those rela- 
tions by the Resolution of the Imperial Conference of 1923 on the 
subject of the negotiation, signature and ratification of treaties.* 


*This Resolution was as follows: " 


“‘The Conference recommends for the acceptance of the Governments of the Empire 
represented that the following procedure should be observed in the negotiation, signature, 
and ratification of international agreements. 

“The word ‘treaty’ is used in the sense of an agreement which, in accordance with the 
normal practice of diplomacy, would take the form of a treaty between Heads of States, 
signed by plenipotentiaries provided with Full Powers issued by the Heads of the States, 
and authorising the holders to conclude a treaty.” 


I. 


1. Negotiation. 


“(a) It is desirable that no treaty should be negotiated by any of the governments of 
the Empire without due consideration of its possible effect on other parts of the Empire, 
or, if circumstances so demand, on the Empire as a whole. 

“(b) Before negotiations are opened with the intention of concluding a treaty, steps 
should be taken to ensure that any of the other governments of the Empire likely to be 
interested are informed, so that, if any such government considers that its interests would 
be affected, it may have an opportunity of expressing its views, or, when its interests are 
intimately involved, of participating in the negotiations. 

“‘(c) In all cases where more than one of the governments of the Empire participates 
in the negotiations, there should be the fullest possible exchange of views between those 
governments before and during the negotiations. In the case of treaties negotiated at Inter- 
national Conferences, where there is a British Empire Delegation, on which, in accordance 
with the now established practice, the Dominions and India are separately represented, 
such representation should also be utilised to attain this object. 

“(d) Steps should be taken to ensure that those governments of the Empire whose 
representatives are not participating in the negotiations should, during their progress, be 
kept informed in regard to any points arising in which they may be interested. 


2. Signature. 

“(a) Bilateral treaties imposing obligations on one part of the Empire only should be 
signed by a representative of the government of that part. The Full Power issued to such 
representative should indicate the part of the Empire in respect of which the obligations 
are to be undertaken, and the preamble and text of the treaty should be so worded as to 
make its scope clear. 

“*(b) Where a bilateral treaty imposes obligations on more than one part of the Empire, 
the treaty should be signed by one or more plenipotentiaries on behalf of all the govern- 
ments concerned. 

“(c) As regards treaties negotiated at International Conferences, the existing practice 
of signature by plenipotentiaries on behalf of all the governments of the Empire represented 
at the Conference should be continued, and the Full Powers should be in the form employed 
at Paris and Washington. 


"3. Ratification. 
“The existing practice in connection with the ratification of treaties should be maintained. 


WUE 


“Apart from treaties made between Heads of States, it is not unusual for agreements 
to be made between governments. Such agreements, which are usually of a technical or 
administrative character, are made in the names of the signatory governments, and signed 
by representatives of those governments, who do not act under Full Powers issued by the 
Heads of the States: they are not ratified by the Heads of the States, though in some cases 
some form of acceptance or confirmation by the governments concerned is employed. 
As regards agreements of this nature the existing practice should be continued, but before 
entering on negotiations the governments of the Empire should consider whether the 
interests of any other part of the Empire may be affected, and, if so, steps should be taken 


pr 


I20 


But it seemed desirable to examine the working of that Resolution 
during the past three years and also to consider whether the princi- 
ples laid down with regard to Treaties could not be applied with 
advantage in a wider sphere. 


(a.) Procedure in Relation to Treaties 


We appointed a special sub-committee under the Chairmanship 
of the Minister of Justice of Canada (The Honourable E. Lapointe, 
K.C.) to consider the question of treaty procedure. 

The Sub-Committee, on whose report the following paragraphs 
are based, found that the Resolution of the Conference of 1923 
embodied on most points useful rules for the guidance of the Govern- 
ments. As they became more thoroughly understood and established, 
they would prove effective in practice. 

Some phases of treaty procedure were examined however in 
greater detail in the light of experience in order to consider to what 
extent the Resolution of 1923 might with advantage be supplemented. 


Negotiation. 

It was agreed in 1923 that any of the Governments of the Em- 
pire contemplating the negotiation of a treaty should give due con- 
sideration to its possible effect upon other Governments and should 
take steps to inform Governments likely to be interested of its 
intention. 

This rule should be understood as applying to any negotiations 


which any Government intends to conduct, so as to leave it to the — 


other Governments to say whether they are likely to be interested. 

When a Government has received information of the intention 
of any other Government to conduct negotiations, it is incumbent 
upon it to indicate its attitude with reasonable promptitude. So 
long as the initiating Government receives no adverse comments 
and so long as its policy involves no active obligations on the part 


to ensure that the government of such part is informed of the proposed negotiations, in 
order that it may have an opportunity of expressing its views.”’ 

The Resolution was submitted to the full Conference and unanimously approved. It 
was thought, however, that it would be of assistance to add a short explanatory statement 
in connection with part I (3), setting out the existing procedure in relation to the rati- 
fication of treaties. This procedure is as follows: 

(a) The ratification of treaties imposing obligations on one part of the Empire is effected 

at the instance of the government of that part: 


(6) The ratification of treaties imposing obligations on more than one part of the Empire 
is effected after consultation between the governments of those parts of the Em- 
pire concerned. It is for each government to decide whether Parliamentary ap- 
proval or legislation is required before desire for, or concurrence in, ratification is 
intimated by that government. 

[18] 


ns 


I21I 


of the other Governments, it may proceed on the assumption that 
its policy is generally acceptable. It must, however, before taking 
any steps which might involve the other Governments in any active 
obligations, obtain their definite assent. 

Where by the nature of the treaty it is desirable that it should be 
ratified on behalf of all the Governments of the Empire, the initiat- 
ing Government may assume that a Government which has had 
full opportunity of indicating its attitude and has made no adverse 
comments will concur in the ratification of the treaty. In the case 
of a Government that prefers not to concur in the ratification of a 
treaty unless it has been signed by a plenipotentiary authorised to 
act on its behalf, it will advise the appointment of a plenipotentiary 
so to act. 


Form of Treaty. 

Some treaties begin with a list of the contracting countries and 
not with a list of Heads of States. In the case of treaties negotiated 
under the auspices of the League of Nations, adherence to the word- 
ing of the Annex to the Covenant for the purpose of describing the 
contracting party has led to the use in the preamble of the term 
“British Empire” with an enumeration of the Dominions and India 
if parties to the Convention but without any mention of Great 
Britain and Northern Ireland and the Colonies and Protectorates. 
These are only included by virtue of their being covered by the 
term “British Empire.” This practice, while suggesting that the 
Dominions and India are not on a footing of equality with Great 
Britain as participants in the treaties in question, tends to obscurity 
and misunderstanding and is generally unsatisfactory. 

As a means of overcoming this difficulty it is recommended that 
all treaties (other than agreements between Governments) whether 
negotiated under the auspices of the League or not should be made 
in the name of Heads of States, and if the treaty is signed on behalf 
of any or all of the Governments of the Empire, the treaty should 
be made in the name of the King as the symbol of the special rela- 


| tionship between the different parts of the Empire. The British 


units on behalf of which the treaty is signed should be grouped: to- 
gether in the following order: Great Britain and Northern Ireland 
and all parts of the British Empire which are not separate members 
of the League, Canada, Australia, New Zealand, South Africa, Irish 


[19] 


122 


Free State, India. A specimen form of treaty as recommended is 
attached as an appendix to the Committee’s report.* 

In the case of a treaty applying to only one part of the Empire 
it should be stated to be made by the King on behalf of that part. 

The making of the treaty in the name of the King as the symbol 
of the special relationship between the different parts of the Empire 
will render superfluous the inclusion of any provision that its terms 
must not be regarded as regulating inter se the rights and obligations 
of the various territories on behalf of which it has been signed in 
the name of the King. In this connection it must be borne in mind 
that the question was discussed at the Arms Traffic Conference in 
1925, and that the Legal Committee of that Conference laid it down 
that the principle to which the foregoing sentence gives expression 
underlies all international conventions. 

In the case of some international agreements the Governments of 
different parts of the Empire may be willing to apply between them- 
selves some of the provisions as an administrative measure. In this 
case they should state the extent to which and the terms on which 
such provisions are to apply. Where international agreements are 
to be applied between different parts of the Empire, the form of a 
treaty between Heads of States should be avoided. 


Full Powers. 

The plenipotentiaries for the various British units should have 
full powers, issued in each case by the King on the advice of the 
Government concerned, indicating and corresponding to the part 
of the Empire for which they are to sign. It will frequently be found 
convenient, particularly where there are some parts of the Empire 
on which it is not contemplated that active obligations will be im- 
posed, but where the position of the British subjects belonging to 
these parts will be affected, for such Government to advise the issue 
of full powers on their behalf to the plenipotentiary appointed to 
act on behalf of the Government or Governments mainly con- 
cerned. In other cases provision might be made for accession by — 
other parts of the Empire at a later date. 


Signature. 
In the cases where the names of countries are appended to the sig- 
natures in a treaty, the different parts of the Empire should be desig- 
*See pp. 27 and 28. | 


[20 ] 


SS ae 


= 


128 


nated in the same manner as is proposed in regard to the list of pleni- 
potentiaries in the preamble to the treaty. The signatures of the 
plenipotentiaries of the various parts of the Empire should be grouped 
together in the same order as is proposed above. 

The signature of a treaty on behalf of a part of the Empire should 
cover territories for which a mandate has been given to that part of 
the Empire, unless the contrary is stated at the time of the signature. 


Coming into Force of Multilateral Treaties. 

In general, treaties contain a ratification clause and a provision 
that the treaty will come into force on the deposit of a certain num- 
ber of ratifications. The question has sometimes arisen in connection 
with treaties negotiated under the auspices of the League whether, 
for the purpose of making up the number of ratifications necessary 
to bring the treaty into force, ratifications on behalf of different parts 
of the Empire which are separate Members of the League should be 
counted as separate ratifications. In order to avoid any difficulty 
in future, it is recommended that when it is thought necessary that 
a treaty should contain a clause of this character, it should take 
the form of a provision that the treaty should come into force when 
it has been ratified on behalf of so many separate Members of the 
League. 

We think that some convenient opportunity should be taken of 
explaining to the other Members of the League the changes which 
it is desired to make in the form of treaties and the reasons for which 
they are desired. We would also recommend that the various Govern- 
ments of the Empire should make it an instruction to their repre- 
sentatives at International Conferences to be held in future that 
they should use their best endeavours to secure that effect is given 
to the recommendations contained in the foregoing paragraphs. 


(b.) Representation at International Conferences 


We also studied, in the light of the Resolution of the Imperial 
Conference of 1923 to which reference has already been made, the 
question of the representation of the different parts of the Empire 
at International Conferences. The conclusions which we reached 
may be summarized as follows: 


1. No difficulty arises as regards representation at con- 
ferences convened by, or under the auspices of, the League of 


ion 


124 


Nations. In the case of such conferences all members of the 
League are invited, and if they attend are represented separately 
by separate delegations. Cooperation is ensured by the applica- 
tion of paragraph I.1. (c) of the Treaty Resolution of 1923. 

2. As regards international conferences summoned by for- 
eign Governments, no rule of universal application can be 
laid down, since the nature of the representation must, in part, 
depend on the form of invitation issued by the convening 
Government. 


(a.) In conferences of a technical character, it is usual and always 
desirable that the different parts of the Empire should (if they 
wish to participate) be represented separately by separate dele- 
gations and where necessary efforts should be made to secure 
invitations which will render such representation possible. 

(b.) Conferences of a political character called by a foreign Govern- 
ment must be considered on the special circumstances of each 
individual case. 


It is for each part of the Empire to decide whether its particular 
interests are so involved, especially having regard to the active ob- 
ligations likely to be imposed by any resulting treaty, that it desires 
to be represented at the Conference, or whether it is content to leave 
the negotiation in the hands of the part or parts of the Empire more 
directly concerned and to accept the results. 

If a Government desires to participate in the conclusion of a treaty, 
the method by which representation will be secured is a matter to 
be arranged with the other Governments of the Empire in the light 
of the invitation which has been received. 

Where more than one part of the Empire desires to be represented, 
three methods of representation are possible: 


(i.) By means of a common plenipotentiary or plenipotentiaries, 
the issue of full powers to whom should be on the advice of all 
parts of the Empire participating. 

(ii.) By a single British Empire delegation composea of separate 
representatives of such parts of the Empire as are participating 
in the conference. This was the form of representation em- 
ployed at the Washington Disarmament Conference of 1921. 

(iii.) By separate delegations representing each part of the Empire 
participating in the conference. If, as a result of consultation, 


[22 ] 


125 


this third method is desired, an effort must be made to ensure 
that the form of invitation from the convening Government 
will make this method of representation possible. 


Certain non-technical treaties should, from their nature, be con- 
cluded in a form which will render them binding upon all parts of 
the Empire, and for this purpose should be ratified with the concur- 
rence of all the Governments. It is for each Government to decide 
to what extent its concurrence in the ratification will be facilitated 
by its participation in the conclusion of the treaty, as, for instance, 
by the appointment of a common plenipotentiary. Any question 
as to whether the nature of the treaty is such that its ratification 
should be concurred in by all parts of the Empire is a matter for 
discussion and agreement between the Governments. 


(c.) General Conduct of Foreign Policy 


We went on to examine the possibility of applying the principles 
underlying the Treaty Resolution of the 1923 Conference to matters 
arising in the conduct of foreign affairs generally. It was frankly 
recognised that in this sphere, as in the sphere of defence, the major 
share of responsibility rests now, and must for some time continue 
to rest, with His Majesty’s Government in Great Britain. Never- 
theless, practically all the Dominions are engaged to some extent, 
and some to a considerable extent, in the conduct of foreign rela- 
tions, particularly those with foreign countries on their borders. A 
particular instance of this is the growing work in connection with the 
relations between Canada and the United States of America which 
has led to the necessity for the appointment of a Minister Plenipo- 
tentiary to represent the Canadian Government in Washington. 
We felt that the governing consideration underlying all discussions 
of this problem must be that neither Great Britain nor the Domin- 
ions could be committed to the acceptance of active obligations ex- 
cept with the definite assent of their own Governments. In the 
light of this governing consideration, the Committee agreed that the 
general principle expressed in relation to Treaty negotiations in 
Section V (a) of this Report, which is indeed already to a large ex- 
tent in force, might usefully be adopted as a guide by the Govern- 
ments concerned in future in all negotiations affecting foreign rela- 
tions falling within their respective spheres. 


[23 ] 


126 


(d.) Issue of Exequaturs to Foreign Consuls in the Dominions 


_A question was raised with regard to the practice regarding the 
issue of exequaturs to Consuls in the Dominions. The general prac- 
tice hitherto, in the case of all appointments of Consuls de Carriére 
in any part of the British Empire, has been that the foreign Govern- 
ment concerned notifies His Majesty’s Government in Great Britain, 
through the diplomatic channel, of the proposed appointment and 
that, provided that it is clear that the person concerned is, in fact, a 
Consul de Carriére, steps have been taken, without further formality, 
for the issue of His Majesty’s exequatur. In the case of Consuls 
other than those de Carriére, it has been customary for some time 
past to consult the Dominion Government concerned before the 
issue of the exequatur. 

The Secretary of State for Foreign Affairs informed us that His 
Majesty’s Government in Great Britain accepted the suggestion 
that in future any application by a foreign Government for the issue 
of an exequatur to any person who was to act as Consul ina Dominion 
should be referred to the Dominion Government concerned for con- 
sideration and that, if the Dominion Government agreed to the 
issue of the exequatur, it would be sent to them for counter-signa- 
ture by a Dominion Minister. Instructions to this effect had indeed 
already been given. 


(e.) Channel of Communication between Dominion Governments 
and Foreign Governments 


We took note of a development of special interest which had 
occurred since the Imperial Conference last met, viz., the appoint- 
ment of a Minister Plenipotentiary to represent the interests of the 
Irish Free State in Washington, which was now about to be followed 
by the appointment of a diplomatic representative of Canada. We 
felt that most fruitful results could be anticipated from the coopera- 
tion of His Majesty’s representatives in the United States of America, 
already initiated, and now further to be developed. In cases other 
than those where Dominion Ministers were accredited to the Heads 
of Foreign States, it was agreed to be very desirable that the existing 
diplomatic channels should continue to be used, as between the Do- 
minion Governments and foreign Governments, in matters of general 
and political concern. 


[24 ] 


127 
VI. System or CoMMUNICATION AND CONSULTATION 


Sessions of the Imperial Conference at which the Prime Ministers 
of Great Britain and of the Dominions are all able to be present 
cannot, from the nature of things, take place very frequently. The 
system of communication and consultation between Conferences 
becomes therefore of special importance. We reviewed the position 
now reached in this respect with special reference to the desirability 
of arranging that closer personal touch should be established be- 
tween Great Britain and the Dominions and the Dominions inter se. 
Such contact alone can convey an impression of the atmosphere in 
which official correspondence is conducted. Development, in this 
respect, seems particularly necessary in relation to matters of major 
importance in foreign affairs where expedition is often essential, and 
urgent decision necessary. A special aspect of the question of con- 
sultation which we considered was that concerning the representa- 
tion of Great Britain in the Dominions. By reason of his consti- 
tutional position, as explained in Section IV (6) of this Report, 
the Governor-General is no longer the representative of His Majesty’s 
Government in Great Britain. There is no one therefore in the Do- 
minion capitals in a position to represent with authority the views 
of His Majesty’s Government in Great Britain. 

We summed up our conclusions in the following Resolution, which 
is submitted for the consideration of the Conference: 


“The Governments represented at the Imperial Conference 
are impressed with the desirability of developing a system of 
personal contact, both in London and in the Dominion capitals, 
to supplement the present system of inter-communication and 
the reciprocal supply of information on affairs requiring joint 
consideration. The manner in which any new system is to be 
worked out is a matter for consideration and settlement between 
His Majesty’s Governments in Great Britain and the Dominions, 
with due regard to the circumstances of each particular part of 
the Empire, it being understood that any new arrangements should 
be supplementary to, and not in replacement of, the system of 
direct communication from Government to Government and the 
special arrangements which have been in force since 1918 for com- 
munications between Prime Ministers.” 


[25] 


128 


VII. PAartTICULAR ASPECTS OF FOREIGN RELATIONS DiIscUSSED 
BY COMMITTEE 


It was found convenient that certain aspects of foreign relations 
on matters outstanding at the time of the Conference should be 
referred to us, since they could be considered in greater detail, and 
more informally, than at meetings of the full Conference. 


(a.) Compulsory Arbitration in International Disputes 


One question which we studied was that of arbitration in inter- 
national disputes, with special reference to the question of acceptance 
of Article 36 of the Statute of the Permanent Court of International 
Justice, providing for the compulsory submission of certain classes 
of cases to the Court. On this matter we decided to submit no Reso- 
lution to the Conference, but, whilst the members of thé Committee 
were unanimous in favouring the widest possible extension of the 
method of arbitration for the settlement of international disputes, 
the feeling was that it was at present premature to accept the obli- 
gations under the Article in question. A general understanding was 
reached that none of the Governments represented at the Imperial 
Conference would take any action in the direction of the acceptance 
of the compulsory jurisdiction of the Permanent Court, without 
bringing up the matter for further discussion. 


(b.) Adherence of the United States of America to the Protocol 
establishing the Permanent Court of International Justice 


Connected with the question last mentioned, was that of adherence 
of the United States of America to the Protocol establishing the 
Permanent Court of International Justice. 

The special conditions upon which the United States desired to 
become a party to the Protocol had been discussed at a special 
Conference held in Geneva in September, 1926, to which all the 
Governments represented at the Imperial Conference had sent rep- 
resentatives. We ascertained that each of these Governments was 
in accord with the conclusions reached by the special Conference 
and with the action which that Conference recommended. 


(c.) The Policy of Locarno 


The Imperial Conference was fortunate in meeting at a time just 
after the ratifications of the Locarno Treaty of Mutual Guarantees 


[ 26 J 


129 


had been exchanged on the entry of Germany into the League of 
Nations. It was therefore possible to envisage the results which the 
Locarno Policy had achieved already, and to forecast to some extent 
the further results which it was hoped to secure. These were ex- 
plained and discussed. It then became clear that, from the stand- 
point of all the Dominions and of India, there was complete approval 
of the manner in which the negotiations had been conducted and 
brought to so successful a conclusion. 

Our final and unanimous conclusion was to recommend to the Con- 
ference the adoption of the following Resolution: 

“The Conference has heard with satisfaction the statement 
of the Secretary of State for Foreign Affairs with regard to the 
efforts made to ensure peace in Europe, culminating in the agree- 
ments of Locarno; and congratulates His Majesty’s Government in 
Great Britain on its share in this successful contribution towards 
the promotion of the peace of the world.’ 

Signed on behalf of the Committee, 


BALFOUR, Chairman. 
November 18, 1926. 


APPENDIX 
(See Section V (a).) 
SPECIMEN FORM OF TREATY 
The President of the United States of America, His Majesty the 
King of the Belgians, His Majesty the King [here insert His Majesty's 
full title], His Majesty the King of Bulgaria, &c., &c. 


Have resolved to conclude a treaty for that purpose and to that 
end have appointed as their Plenipotentiaries: 


Te EES GPE A VAISS as 2a le ca Mi ie os 


His Majesty the King [title as above]: 

for Great Britain and Northern Ireland and all parts of ‘the British 
Empire which are not separate Members of the League (of 
Nations), AB. 


[27] 


130 


for the Dominion of Canada, 


CD. 
for the Commonwealth of Australia, 

EF. 
for the Dominion of New Zealand, 

: GH. 

for the Union of South Africa, 

IRE 
for the Irish Free State, ‘ 

KL. 
for India, 

MN. 


who, having communicated their full powers, found in good and due | 
form, have agreed as follows: . 


womle ier 8 ee ee ee ele ee 8 ee he we ee ww 0 8 8 8m wl wm im mm iMw eS ss ees ee 


Sa a ee ee a rere MT Oe SN 


In faith whereof the above-named Plenipotentiaries have signed 
the present Treaty. 


(or if the territory for which each Plenipotentiary signs is to be 
specified : 


(for Great Britain, &c.)).. 02... .0a. 4. AB. 
(for Canada). 0) oc de ee 
(for Australia)...:. 00.00.0900 i eee EF. 
(for New Zealand)... ..). 0.0.04 0) GH. 
(for South: Adtiea) 30) eo Se ee IJ. 
(for) the Irish) Free'State)./. 025. ..4 J ene: 
(for India). (6) asc eo i ee MN.) 


131 


THE EMPIRE AS IT IS 
[Reprinted from the London Times, November 22, 1926.] 


There is obviously something more substantial than politeness 
in the expressions of satisfaction which have been coming lately 
from all the delegates to the Imperial Conference. It is a new ex- 
perience, for civil speeches of farewell have not always succeeded 
on previous occasions in concealing differences and disappointments. 
The present Conference is unquestionably regarded by its members 
as an unusual—perhaps even as an unexpected—success, and that 
unanimous feeling of contentment must affect every criticism of 
the mass of Reports which are now pouring from -its various Com- 
mittees. Here in England we have long since emerged from the 
habit of mind which at one time divided the self-governing Empire 
into two categories—the Mother Country on the one hand, the Do- 
minions (as though they were all alike) on the other. If anything 
were needed to dispel that illusion, the accession to the Conference 
of the Irish Free State, and of India, with its tentative and partial 
self-government, would have finished so simple a dichotomy. But, 
apart altogether from these special cases, there are no two partners 
in the British Empire whose outlook or necessities or contribution 
to the common stock are in any sense the same. Least of all do they 
take identical views of that highly important group of problems which 
is envisaged in the latest Report under the name of ‘“Inter-Imperial 
Relations.’’ The circumstances of Canada, developing her resources 
in close contact with the United States and perfectly secure from 
any other quarter, are fundamentally dissimilar from those of Aus- 
tralia, which is still a half-peopled continent in the least peaceful 
quarter, of the globe. South Africa has her own dangers and diffi- 
culties both within and without. Newfoundland falls in most re- 
spects into the Canadian category, though a lawsuit of great histori- 
cal and legal interest is illustrating at this moment the sort of dis- 
pute between them which a wise system of Inter-Imperial relations 
can solve. New Zealand, curiously divergent in many respects, 
looks upon the world from the same angle as Australia. All these 
peoples have grown to nationhood under different climates, differ- 


[29] 


132 


ent social conditions, the pressure of different impulses from outside. 
Beyond the similar experience that they are all young peoples, sprung 
from the same stock, there is hardly a common denominator. 

If, then, the Prime Ministers of so many heterogeneous com- 
munities are really satisfied with their work and with one another, 
that seems to us to be a far more important fact than their joint 
signature of any single document. The Report on Inter-Imperial 
Relations is, beyond all question, a very remarkable State paper. 
It is at the same time courageous, ingenious, and comprehensive. 
There is probably no parallel to a Report which deals with so many 
great problems in language so careful and so definite. But it would 
be a profound mistake to apply to it, as hurried readers have already 
done, such titles as a new departure or a far-reaching constitutional 
experiment. In all its various clauses there is hardly a statement or 
a definition which does not coincide with familiar practice. It is 
essentially a register of conditions as they exist already, rather than 
a programme for the future. The preamble, for instance, includes a 
description of the British Empire in language—‘‘autonomous com- 
munities,” ““equal in status,’’ “common allegiance,’’ and the rest— 
which has long been common coin and is only saved by its italics 
from being almost incidental. It may have its uses for quotation 
to suspicious nationalists, but that is all. Then comes a trifling 
change in the Royal Title, by no means the first, which substitutes 
“Great Britain and Ireland”’ for ‘“‘the United Kingdom’’—a change 
of no practical significance in itself, but one which recognizes the 
essential difference of the position of Southern Ireland from that 
of the grouped Dominions “‘beyond the seas.’’ Of greater impor- 
tance is the clause which follows, dealing with the position of Gover- 
nors-General, because it definitely challenges the anomalous theory 
by which a Governor-General is both the KiNnG’s representative 
and the formal channel of communication with His Majrsty’s 
Ministers in London. But here again the practice of direct communi- 
cation between Prime Ministers is by no means a new one, and it 
matters very little, except in theory, whether the KING’s representa- 
tive is supplied with copies of the correspondence “for transmission” 
(in the official phrase) or ‘‘for information.’”” What does matter 
enormously, of course, is ‘‘the development of a system of personal 
contact, both in London and in the Dominion capitals,” as the 
problem is defined towards the end of the Report. That practical 


[30 ] 


133 


necessity does not arise for the first time from the fact that the 
Governor-General’s position has been clarified, but it is brought 
for the first time into prominence. It has always existed in fact, 
and is being met by various provisional expedients—Australia here 
taking the lead by the appointment of a personal representative of 
her Prime Minister in England. Other Dominions may follow differ- 
ent methods. They may adopt the Australian practice, or they may 
prefer to reverse it by welcoming in their own countries the political 
representatives of the British Government of the day. The Report, 
very wisely, makes no attempt to recommend uniformity; but it 
emphasizes a problem which can only be solved without confusion 
by clear thinking, practical experience, and above all by ‘‘a succes- 
sion of persons duly qualified for the service.’ 

Much of the remainder of the Report is devoted to the removal 
of well-known anomalies and anachronisms—as, for instance, in the 
declaration that the scope of appeals to the Privy Council should 
be determined ‘‘in accordance with the wishes of the part of the Em- 
pire primarily affected.”” All the talk of equal status and autonomy 
would be meaningless except on that understanding; but it is clear 
that there is no disposition to abandon the Judicial Committee as 
the final Court of Appeal for appropriate cases. Certain other anom- 


_alies—in particular the formal restrictions on Dominion legisla- 


: 
| 


tion of which the Merchant Shipping Act is the most obvious ex- 
ample—have been considered and relegated to specialist Commit- 
tees and Sub-Conferences. The fundamental principle which is to 
inform all these deliberations is that “it is the right of the Govern- 
ment of each Dominion to advise the Crown in all matters relating 
to its own affairs.’”’ That, indeed, is the keynote of all the recom- 
mendations of the Conference, and, so far as this country is concerned, 
there is no doubt or discord about it at all. The real difficulty has 
always been to interpret it to the world outside, and the Report 
faces frankly the extraordinary complications which are bound to 
encumber—do already encumber—the relations of the British Em- 
pire with foreign countries. Are we a single unit for purposes of 
diplomacy? Or half a dozen separate units? What is our position 
in the negotiation and conclusion of treaties? In what guise do we 
take part in international conferences? NHow far can one nation 
commit its partners to the obligations which it has undertaken for 
itself? All that laborious thinking and skilful drafting can achieve 


(en 4 


134 


has gone to providing answers to these questions, but there is nothing 
unforeseen about any of them, and the practical result will be pre- 
cisely what we all please to make it. The “governing consideration’’— 
that neither Great Britain nor the Dominions can be committed 
to the acceptance of active obligations except with the definite 
assent of their own Government—was an effective truism long before 
the present Conference met. No fresh decision was taken, or could 
be taken. The working of this unprecedented system still depends 
in the last resort upon a sincere determination to make it work. 
That is why the manifest good-fellowship of men so various, so typi- 
cal of their constituencies, so strong at the moment (a singular 
piece of good fortune) in their backing at home, seems infinitely more 
important than their common signature of any formal Report. The 
Imperial Conference has frankly and prudently declined the task of 
‘attempting to lay down a Constitution for the British Empire.” 
It has provided instead an agreed and authoritative picture of the 
Empire as it is. 


135 


ADDRESS BY 
THE RT. HON. STANLEY MELBOURNE BRUCE, 
PRIME MINISTER OF AUSTRALIA 


[Delivered at a dinner given in his honor, by the Pilgrims of the United 
States, at the Hotel Biltmore, New York, December 29, 1926.] 


There are many links which bind the Pilgrims’ Association to the 
great Dominions of the British Empire overseas, and it is, I think, 
interesting to remember that the first occasion upon which the prime 
ministers of the different self-governing parts of the British Empire 
spoke in public on the occasion of the first Imperial Conference that 
was ever held, was at a banquet given in their honor by the Pilgrims’ 
Association in Great Britain. 

And I think there is something a little more significant than 
we grasp at first sight in that fact, because your Association has stood 
throughout its history for a better understanding between our two 
great nations and a better realization of the problems that confront 
us. The Imperial Conferences, the first one and all the subsequent 
ones, have been held for no other purpose than to make the different 
far-flung parts of the British Empire understand each other a little 
better and appreciate each other’s problems. 

Tonight I feel in addressing the Pilgrims’ Association in New 
York—and I am very appreciative of the honor that you have done 
me in permitting me to do so—that there is no subject with which I 
could better deal than the one which you have touched upon, the pres- 
ent position of the British Empire. I will endeavor to show you ex- 
actly what we stand for today, what are the ideals and aspirations 
that underlie all our endeavors, and what we hope in the future, by 
more closely binding together in unity under the crown this British 
Empire, that we may be able to accomplish, not only to the advantage 
of the British Empire, but to the permanent benefit of all nations 
and peoples on earth. 

I am afraid in this great country of yours that at times there 
is a little misunderstanding of the British Empire. I realize that it 
is natural. I think it would be very surprising if it were not so. 


[33 ] 


136 


If we were to throw our minds back over history and over all the 
relations that have existed between our two countries—while, I ap- 

preciate the flattering things which you said with regard to the British 

genius for meeting new and unforeseen circumstances, I suggest that 

there was one time when we did not show quite that genius to which 

you have referred. 

But I also think that I have a considerable advantage in trying to 
present to you the British Empire as we see it. Fora British states- 
man or a representative of Great Britain to essay the task would, I 
think, be very nearly an action of folly. It would certainly present 
great difficulties to him. To me as a representative of one of the 
great self-governing dominions, enjoying full autonomy and full self- 
governing rights and powers, the task presents no difficulty at all, 
particularly when I remember the great debt of gratitude we, in the 
Dominions, owe to you, the American people, for the action you took 
some considerable period ago which is the basis of most of the priv- 
ileges and most of the rights which we enjoy today. And I think 
that gives me great advantages when I attempt to deal with this 
question before such an audience as I have the opportunity of speak- 
ing to tonight. 

The first point I would desire to stress, and stress very strongly, 
is that the British Empire as it is so often conceived, no longer exists 
at all. The British Empire, when that expression is used, visualizes 
to many minds an empire that is really a centralized form of govern- 
ment, one where the affairs of all parts are dominated and controlled 
by some central authority. That was the position before the seces- 
sion of the American Colonies, but that has all passed away. There 
is no such position in existence at the present time. 

With the secession of the American Colonies came a new vision 
altogether. It was a perilous and tragic time, for the British Empire 
as it was then constituted, when the great Colonies in this American 
Continent seceded and by the Declaration of Independence became 
entirely dissevered from their old connections, but it had its compen- 
sation, in that it taught a lesson which has never been forgotten. 

The reason why that secession took place was that the British 
Government of the day had forgotten that age-long fight in Britain 
whereby the liberties of the people and their freedom had been estab- 
lished. They forgot one of the fundamental principles established 
in that war for the rights of the people, that there must never be 
taxation without representation. 


[34] 


137 


But all those lessons were learned one hundred and fifty years 
ago and from that point we start out with a new British Empire alto- 
gether. I would remind you that when the secession of the American 
Colonies took place you started and laid the foundations of the great 
nation which today is the United States of America, but you also laid 
the foundations of what is also a great nation, that is, the British 
Empire as it now exists. In our development our two great nations 
have got many lines of contact; there is a great parallel between 
what we and you have accomplished. 

At the time of the secession you had a precarious foothold upon 
this great continent which today you have developed in a way that is 
the admiration and the marvel of the whole world. The British Em- 
pire had a very precarious footing in Canada. It was in a position 
of very great danger and doubt in India. Australia, New Zealand, 
South Africa all came afterwards; they were not in existence in those 
days. You had a population of something under 4,000,000; Great 
Britain had a population of about 10,000,000, and yet from those very 
small beginnings have grown up the two greatest nations on earth to- 
day. And the problem that you had to confront in this continent 
was very similar to ours. 

We both had men of initiative, ot enterprise, who were not con- 
tent to walk in the footsteps of those who had gone before them, but 
were determined to push out, to carve out a new life for themselves, 
to go where opportumty, where fame and where prosperity awaited 
them. Your people went across this great continent, you brought 
the wilderness into subjection, you brought its great resources to the 
use of mankind. In our mother islands of Britain was no room 
for great accomplishment such as you achieved, and our people of 
energy and initiative had to go out into the four corners of the world, 
and they went, and founded British communities overseas which have 
steadily grown and progressed, until you and we have become the 
two great nations that exist today. 

In the development of our system of government we had many 
problems that you did not have to face. It is possible to establish a 
great system such as your federation when you are inside the confines 
of one great continent, however big that continent may be. But it is 
another thing to solve the problem of government when your people 
are scattered over the earth, when they are separated by great dis- 
tances which can only be traversed, or could in the past, by the sea. 


[351] 


138 


But I venture to say we have solved our problem as you have solved 
yours. You have established your great federal system of govern- 
ment. We have brought into existence this extraordinary, this intan- 
gible, this ununderstandable thing composed of communities ab- 
solutely free, independent, with self-governing rights, with their 
own parliaments, absolute masters of their own destiny, and yet 
bound together by their common allegiance to the throne, by their 
common unity as citizens of the British Empire. Yet I agree with 
you that neither one nor the other of those things would have been 
sufficient to hold a great empire together. It is only because behind 
all we have common ideals, common aspirations, and common 
desires. 

That is what I suggest we have managed to achieve in this British 
Empire. The Empire has developed in this last one hundred and 
fifty years in a manner far different to the period which preceded it. 
The system by which the great self-governing Dominions have 
come into existence is a system whereby small communities of British 
citizens who went overseas and established themselves, were first 
given certain small self-governing rights. They had a Governor who, 
generally speaking, was a representative of the army or of the navy, 
who was directly responsible to Downing Street and who, in a great 
measure, was really the controller of their destinies. But as they 
grew in strength, as they advanced, they were given further self-gov- 
erning rights. The connection and control from Downing Street be- 
gan to disappear, until the stage was reached where a Dominion, 
such as the great Dominion on your north, Canada, such as the great 
Dominion of Australia, possessed absolute freedom from any control 
and complete self-governing rights, with their own parliaments and 
with an absolute power to rule and govern the lives of their people. 

Those things have come progressively, they have come over a long 
period of years, but they had all established themselves prior to the 
war and IJ think in all the Dominions we have recognized that in our 
own houses we were masters. But with the war we were suddenly 
faced with a new position, and new factors which we had never con- 
templated. We had been too busily engaged in trying to develop 
our own countries, in carrying out our own social experiments, in try- 
ing our new systems of government, and we had forgotten there 
was an outside world. We had forgotten that there were great com- 
plications that could come to us from that outside world. But in 


[36 ] 


139 


1914, the war broke upon us and we found ourselves involved in a 
life and death struggle which demanded of us the greatest sacrifice 
in lives and in treasure, and yet that war had arisen out of a treaty 
guaranteeing the integrity of Belgium of which we in the far-flung 
parts of the Empire had practically no knowledge, and with regard 
to which we had certainly never been consulted. 

You know how far the different parts of the British Empire re- 
sponded to the call when the war came. You know how far our unity 
was shown and how that unity was really the rock upon which the am- 
bitions of the Central Powers foundered. They never conceived of a 
British Empire that in an hour of crisis would be absolutely united, 
absolutely loyal to the motherland from which we were sprung. 

But while that unity was there, while we made that great effort, 
we were determined that never again would we be involved in a great 
war about which we had never been consulted. We demanded that 
we should have a voice in formulating the foreign policy of the Em- 
pire, and to the credit of the British race, be it said, no sooner was 
that demand expressed than it was granted. During the period of 
the war we had the Imperial War Cabinet; it was laid down that the 
Dominions were entitled to be kept informed and consulted with 
regard to the foreign policy of the Empire; we had our status and 
position confirmed by our admission as separate nations into the 
League of Nations and by our signatures of the Treaty of Versailles. 

With the passing of the war, our position was recognized, the 
new status was accepted, but it was never authoritatively expressed 
to the world. There was in consequence a certain anxiety in some of 
the Dominions as to whether with the passing of the war, we might 
not revert back into the old position of not being consulted, and the 
great accomplishment of the present Imperial Conference was that 
those things which had come to pass with the changing years and the 
changing circumstances, were recognized with the authority and the 
unanimous adhesion and consent of every representative of the self- 
governing parts of the British Empire. 

That document, to which you have referred, laid down no new 
principles. It did not pretend to write a new constitution for the 
British Empire. It only, with authority, stated the point we had 
reached in that natural evolution which has gone on now for so many 
years, and having recognized those things, stated them so that they 
would be unmistakable to the peoples inside the British Empire and 
equally unmistakable to the nations outside, 


har 


140 


Whether in the future that document which was penned at the 
recent Imperial Conference will come to be one of the greatest docu- 
ments in the history of evolution of the British Empire I cannot to- 
night say, but I do say that it shows that in this attempt we have 
made to evolve a system of government and constitutional relation- 
ships under the most difficult circumstances, we have achieved much, 
and with all humility we are entitled to a certain measure of pride in 
what we have accomplished. 

I would almost go so far tonight as to say the word ‘‘empire”’ is 
a misnomer. Ours is a Commonwealth of British Nations. Once it 
is recognized, particularly by the United States, that the Empire as 
it is generally conceived has passed away and that this new Common- 
wealth of free, independent British nations is animated with great 
ideals and aspirations of service to all mankind and adheres to all 
those democratic doctrines that you hold so dear, I believe the way 
would be paved for a better understanding and a more mutual spirit 
of confidence and respect between our two great English-speaking 
races. That I believe is the greatest thing that could be accomplished 
in the world today and the thing which would most surely lead to the 
realization of those principles for which we fought the war, the per- 
manency of peace amongst the nations of the world, a higher stand- 
ard of international morality, and a greater opportunity for happi- 
ness and prosperity to all peoples. 

I think that in the Dominions there is a unique opportunity to do 
something to assist in that understanding. You have only to look 
at the relations between the Dominions and your great republic to 
see how much has already been accomplished. You have on your 
north a Dominion of the British Empire with a frontier line which 
I think runs for something like three thousand miles, and yet because 
of the mutual understanding, mutual tolerance and a recognition of 
common ideals, that frontier has nothing in the nature of any forti- 
fication at all. That frontier stands as a monument of what can be 
accomplished between great people when you have that spirit of un- 
derstanding and mutual respect and regard. 

With the United States and my own country there are many 
points of contact. We rightly or wrongly look toward America as 
the realization of many of those things we set before ourselves when 
we are visualizing the great destiny that we are confident will be our 
portion in the years to come. It is only a hundred years ago that this 


[38] 


141 

e 

great nation of yours which is the admiration of the world, was a 
small people with a great task similar to that which confronts Aus- 
tralia and its small population today. 

I can only say that we draw inspiration from what you have 
accomplished, but we have a great belief in our own country, a great 
confidence in ourselves. I believe it isa good thing to believe in your 
country and believe in yourselves, and we do it to the point that 
while we think that the development and the rise of the United States 
of America was the marvel of the Nineteenth Century, there is going 
to be a greater marvel achieved in the Twentieth Century, and that 
is the rise of the great Australian people and the development of their 
country. 

I have been to an Imperial Conference. I have had opportunities 
that are possibly not given to many of being able to see Britain, the 
whole British Empire, but I have also been able to see it in its con- 
tacts with foreign countries. I have also been able to see the position 
in Europe, and I have been able to some extent with conceivably 
more knowledge than other people are permitted to have, to under- 
stand what is the present position in Europe. And while I have said 
that I believe the Dominions can play a considerable part in creating 
a better understanding between the English-speaking nations of the 
world, I think you can only accomplish that if you are going to say 
what is in your heart, if you are going to tell exactly what you have 
seen and how it strikes you. 

With a certain knowledge of the United States of America because 
I have been here many times, with a belief that we in Australia share 
many of the same ideals that you have, with a belief that in many 
things we see world problems through the same glasses, it has been 
a matter of very great sorrow to me during the present Imperial Con- 
ference to find the attitude adopted in Europe today towards the 
United States of America. It is no good pretending that you can 
travel through Europe and hear encomiums upon the great United 
States of America. You will hear nothing of the sort. In Europe 
today, there is a feeling of antagonism towards the United States, and 
itis very deplorable and regrettable that that should beso. Itsprings 
to a great extent from misunderstanding. The people of Europe, 
far away, regarding Europe as the center and the hub of the whole 
universe have no knowledge of your past history. They have no 
knowledge of your great doctrine laid down by Washington and never 


[39] 


142 


forgotten by your people—that America must avoid entanglements 
and the tragedies and troubles of Europe. They forget these things. 
They are merely looking today at their own position. They forget 
what the effect of America’s intervention in the war was. They for- 
get that it was only because America came in that it was possible for 
the allied cause to triumph when it did. 

All those things have gone from their minds. They only look 
at America as a great country who played a minor part, from their 
point of view, in the war, a great country which became rich out of the 
war and which today is holding them to ransom because they left 
the great task of fighting the war to the European nations. 

You know that that is wrong, and I know that it is wrong, but 
you have got to remember that America also looks at Europe with 
rather the wrong eyes. You sometimes forget in this country, I sug- 
gest, what Europe went through. You forget how she was shattered 
by the war. You forget the deplorable position that she is in today. 
You forget that most of the nations of Europe are looking to a bleak 
future and cannot visualize any possibility of passing through their 
troubles and again coming to prosperity. And when one is looking to 
a future like that you are a little apt to look with very jaundiced eyes. 
The view of Europe as to America, the part she played in the war 
and her present attitude is wrong, but I venture to say it is also a 
pity that there is not a little more understanding and a little more 
sympathy with Europe in America. The plea I would make to you 
is to recognize that it is vital to the world that Europe should again 
be restored, not vital to Europe only, but vital to all the countries 
of the world, vital to the whole of civilization. 

What can be done, what America can do is a question for Amer- 
ica to decide. But I venture to suggest that the problems of Europe, 
the economic reconstruction of Europe can only be brought about by 
the fullest survey of the position and by cooperation between Great 
Britain and the United States of America. 

May I say one other word? I have no sympathy with the inhabi- 
tants of my own country nor have I any with those citizens of the 
United States who say that today they have no interest at all in 
what happens in others parts of the world. One might have been 
able to say that a hundred years ago, but we can’t say it today. Think 
of the position of America! Think of your goods in all the markets 
of the world! Think of your shipping in all ports of the world! Think 


[ 40 ] 


143 


of your financial commitments to most of the nations of the world, 
and you can’t possibly say then that you have no interest at all. 

We have had an astounding lesson that the world has become 
smaller with the advance of science, with the development of mod- 
ern inventions, and modern transport, in the position we all found 
ourselves in the war. We, in Australia, imagined that wars could 
take place in Europe and we could go on with our great task of 
development. We found we were wrong. So the whole world has 
found. 

And the plea I would make to you is to remember that the world 
today has become very small and that it is of vital interest to all to 
recognize that we are concerned with what is happening in the rest 
of the world, and in the stabilization of the world’s affairs. I can 
only see its economic reconstruction, prosperity for ourselves and for 
other nations if we can bring about a cooperation, a mutual under- 
standing of each other’s point of view between the great English- 

speaking races which I believe is the great ideal that your Society 
has set before itself. 

One other way I would put it to you, and it is perhaps the more 
human way of looking at it. If we can only get Europe to realize 
that America is a country inhabited by people with a human under- 
standing, with a human desire to help, and get rid of this appalling 
-idea which is even transferred into its cartoons, that America is a 
‘sort of composite Shylock which is demanding its pound of flesh, 
which is trying to extract the last ounce out of a distracted and war- 
weary world; if, on the other hand, we can get America to see that 
| Europe isn’t merely putting up a gigantic bluff and trying to advan- 
tage herself by the repudiation of her legitimate obligations, I be- 
lieve we will, at least, have made a step forward towards the solution 
of those problems which all of us I think in our hearts recognize are 
vital today to the future prosperity of all mankind. 

We all at that time protested that when the war was over we were 
going to see a new world, and a new era was going to open with peace 
between all nations, and a greater opportunity of happiness for all 
people. We made great pledges to those men whom we asked to go 
and lay down their lives and we didn’t hesitate to say that the call 
was one for the safeguarding and the preservation of everything that 
we held dear, that freedom, liberty and justice were at stake. We 
made great pledges to them and we said if they would respond to the 


C41] 


144 


call we would insure that when the war was over there would be 


* new earth and a new heaven. 


It is because I was in that war—I saw the sacrifices of the me 
who went, I know of the tragic sufferings of the women who re- 
mained behind—that I make this appeal to you that we should al 
strive to bring about a better understanding between the English 
speaking peoples of the world, because in that understanding is th 
greatest hope for civilization and the realization of all those things 


we hold so dear. 
[42] 


——— el 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, r907 ta No. tog, June, 
t924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for imterna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
asim to International Conciliation, 405 West rr7th Street, New York 

ity. 

213. The United States and the System of Mandates, by Walter Russell Bat- 
sell, M.A., Director of the Reference Service on International Affairs of 
a American Library im Paris. Information Regarding the Mandate 

ystem. 
October, 1925. 

2r4. The Advisory Opinions of the Permanent Court of International Justice 
by Manley O. Hudson, Bemis Professor of International Law, Har- 
vard Law School. 

November, 1925. 

2r5. The Trend of Economic Restoration since the Dawes Reparation Settle 
ment, by E. G. Burland, Member of the Staff of the American Section 
of the International Chamber of Commerce. 

December, 1925. 

216. Final Protocol of the Locarno Conference, 1925, and Treaties between 

France and Poland and France and Czechoslovakia. 
January, 1926. 
21t7. Peasant Conditions in Russia, 1925, by Jean Efremoff, Former Minister 
of Justice in the Provisional Government of Russia. 
February, 1926. Ps 
2r8. The Institute of Pacific Relations, by J. Merle Davis, General Secretary. 
March, 1926. 

219. The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 

April, 926. 

220. Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 
berlain. 

May, 1926. iv 
22t. Treaty-Making Power under the Constitution of Japan, by Tsunejira 
Miyaoka, of the Bar of Japan. 
June, 1926. i 

222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 

Rappard, H. Wilsom Harris and Raymond Leslie Buell. 
September, ro26. 

223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 

in the Government of Italy. Recent Legislation im Italy. 
October, 1926. 

224. An Alternative Use of Force: When the Earth Trembled, by Richard 

J. Walsh; The Moral Equivalent of War, by William James. 
November, 1926. 

225. Observations in Egypt, Palestime, and Greece. A Report, by Henry S. 

Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 1926. 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

January, 1927. 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus om 
Recent Chinese Politics and Diplomacy. 

February, 1927. ; 

228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bruce, 
Prime Minister of Australia. 

March, 1927. 


INTERNATIONAL CONCILIATION 


Published monthly, except July and August, by the 
Carnegie Endowment for International Peace 


Entered as second-class matter September 15, 1924, at the post office at 
Worcester, Massachusetts, under the Act of March 3, 1879. 


LOCARNO AND THE BALKANS 


A TurRNING PoINt IN History 
By James T. Shotwell 


Tue Possisitity oF A BALKAN LOCARNO 
By David Mitrany 


APRIL, 1927 
No. 229 


CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 
DIVISION OF INTERCOURSE AND EDUCATION 
PUBLICATION OFFICE: 44 PORTLAND STREET, WORCESTER, MASS. 
EDITORIAL OFFICE: 405 WEST I17TH STREET, NEW YORK CITY 


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CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


Trustees 
RoBERT S. BROOKINGS FRANK O. LowDEN 
NicHoLas Murray ButTLER ANDREW J. MontTAGuE 
Joun W. Davis Dwicat W. Morrow 
FREDERIC A. DELANO RoBErT E. OLps 
Lawton B. EVANS Epwin B. PARKER 
AustEN G. Fox LERoy PERcy 
RoBeErRT A. FRANKS Wi.1am A. PETERS 
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Howarp HEINZ E.rau Root 
Davip JAYNE HILL James Brown Scott 
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Executive Committee 


NicHotas Murray ButLer, Chairman 
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AusTEN G. Fox HENRY S. PRITCHETT 
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JAMES R. SHEFFIELD 
Division of Intercourse and Education 


Director, NicHoLAS MuRRAY BUTLER 


Division of International Law 


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Division of Economics and History 


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CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


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JEAN Erremorfr, Paris, France. (Russia) 

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EpoArpo GIRETTI, Bricherasio, Piedmont, Italy 

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Britain E. von PRITTWITZ UND GAFFRON, 

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, 
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CONTENTS 


SOE GS eee Me SOR SESS LR a ee 7 
A Turninc Port IN History, by James T. Shotwell ... . 9 
THE PosstBiLity OF A BALKAN Locarno, by David Mitrany . 22 


BS raeyY GF THE RRDERRATIVE IDEA . . 92 = 5 ss 2 <= a = 23 


147 


PREFACE 


By the spirit of Locarno is meant that noble spirit of good-will 
and international cooperation which manifested itself in so striking 
and so practical a fashion in the signing, on October 16, 1925, at 
the Swiss town of Locarno, of the memorable agreements which 
subsequently became formal treaties. To these agreements and 
treaties the Governments of France, Germany, Great Britain, 
Belgium, Italy, Czechoslovakia, and Poland are parties. The 
name Locarno is now a symbol for what it is earnestly hoped will 
become the guiding principles in the international relations of the 
future. 

In order that the spirit of Locarno may be made increasingly 
familiar to wide circles of readers and its significance emphasized 
and illustrated, there are here brought together two addresses of 
exceptional interest and importance. The one is an address delivered 
_ by Dr. James T. Shotwell, Trustee of the Carnegie Endowment for 
International Peace and Director of its Division of Economics and 
History, before the Institut Social de Bucarest in October, 1925, 
_ while making a visit to the countries of southeastern Europe as the 
_ formally designated representative of the Endowment. The second 
| is a report made to the Endowment by Mr. David Mitrany, special 
correspondent for southeastern Europe, on the possibility of apply- 
_ ing the principles of the Locarno agreements to the solution of the 
_ problems peculiar to the Balkan States. Mr. Mitrany is a Ru- 
manian by birth and was formerly a member of the foreign editorial 
_ staff of the Manchester Guardian. 

Mr. Hamilton Fish Armstrong, Managing Editor of Foretgn 
Affairs and the Director of the American Yugo-Slav Society, has 
_ been kind enough to prepare the bibliography on Balkan subjects 
_ which is included in the document. 


NicHoLas MurrAy BUTLER 


New York, March 1, 1927. 


149 


A TURNING POINT IN HISTORY + 


BY JAMES T. SHOTWELL 
Director, Division of Economics and History, Carnegie Endowment 


We are living at a turning point in history. This era which has 
witnessed a world war, is also witnessing the beginning of a still 
greater historical event, which is nothing short of a movement to 
rid the world of war as a political instrument and to make aggressive 
wars between civilized nations an international crime. I am not 
speaking of wars of defense nor of peoples that are not civilized. 
Naturally, a movement so vast as this is one that affects the whole 
world, one that reaches down to the foundations of human society; 
but, while its effects are world-wide, in our time, its hope can hardly 
become a reality except among those peoples whose mental growth 
is such that they can work together with understanding and with 
that sense of security which rests upon mutual trust and honor. I 
do not believe that we can think of war as ended forever; but I 
do believe that we now see aggressive war shaken by the most 

powerful of onslaughts, onslaughts too which do not at the same 
time strike at war of defense. For if there is to be no war of aggres- 
| sion, it follows that there would be no need of defense. 
__ What grounds have we for believing that we are to see a change 
so vast and so profound in international politics? We can answer 
that most easily if we will give a few moments to the evidence of 
_ how far we have got even by now. 
_ Down to very recent times war—and war of every kind—was 
| one of the wholly legitimate prerogatives of the sovereign state. 
Indeed, in its power to declare war lay sovereignty’s inherent proof 
and token. And this has become one of the first principles of inter- 
national law. If you ask for a proof of that simply turn the pages 
of any handbook of international law written in the eighteenth or 
| nineteenth centuries. Take, for example, Vattel’s treatment of 
the matter in his ‘“‘Law of Nations,” the manual which during the 
last century was most generally in use. There you will find it set 


1 Translation of an address originally delivered in French. 


[9] 


150 


down that the state, the modern state, the sovereign state, is in 
time of war the sole judge of its own actions as it is in times of peace. 
Sovereignty’s symbol lies just in this, that neither in its relations 
with other states nor with its own does there exist any superior power 
by which sovereignty can itself be judged. From that it also follows 
that if international law allows liberty of action in time of war, 
and if all diplomatic relations have been based upon such liberty 
of action in hours of crisis, the state is entirely free to strike at its 
adversary, to work its will by force, and to put no curb upon its 
power save the limit only of its own desires. The one measure of 
the might of a state was the strength of its armed forces. Sheltered 
- behind them its diplomats met those of other states and with them 
considered how best they could bring to fulfilment what they deemed 
to be the needs of the world viewed internationally. 

International law, diplomatic law, law veritably founded on the 
freedom of engaging in war—no one could even dream of calling it 
in question 

Behind this conception of sovereignty was an historical movement. 
For when a modern state was made a reality, something more took 
place than the mere embodiment of an ideal suddenly bursting upon 
this world. As you above all are in a position to know, behind the 
creation of a modern state was the whole historical current of things, 
the entire history of Europe. And history makes it plain that at 
every critical epoch war had been the true agent of realization. Nor 
has this been true only in the case of modern states. Take the great 
French Revolution. It was by war that it imposed its results on — 
Europe, that it affirmed the rights of man. It was war that fixed 
our present frontiers. War, working in the very bosom of states, 
has created sovereign power, the strength of nations, and won them 
their liberty. In human history war has always been the ultima | 
ratio. It is as if, when it came to matters of international polity, 
there had to be full freedom to levy both upon the wealth of nations 
and upon the lives of their people. In history, then, the part played 
by war has had an importance which history itself has not always 
realized at its full. That being so, can we be at once a good his- | 
torian and such a revolutionist as to believe that the civilized world 
will suffer itself to be deprived of a tool that is so useful? Are we | 
to take the impossible position that after having made full use of | 
this war tool to establish liberty, to secure democracy, and to create 


[10 ] 


—_— =... 


151 


our modern states, we are now to throw it aside and forget it ever 
existed? How could we even do without so valuable a thing? It 
is only too plain that we are here in a position that would at least 
seem impossible; and I doubt if the world has ever seen its like 
before. 

But there is even more to be said. For war has been not only 
such a tool in modern times; it has likewise existed from the be- 
ginning of history. It came into being before any other human in- 
stitution, before law itself. War is older than civilization. It has 
endured throughout all the history of civilization. Very well, but 
for all that I believe we are going to make an end of aggressive war! 

Moreover there is one thing which may give us courage. If you will 
turn back into the pages of history you will find that the abolition 
of slavery—which was merely one step in the progress of modern 
civilization—was something which antiquity felt to be quite un- 
imaginable. It is even impossible to conceive of antique civilization 
without slavery. Remember that the poets, the thinkers, the 
philosophers, the great creators of art and-science in antiquity all 
accepted slavery as something established from the beginning, as 
an institution that was essential, for upon it was based the whole 
development of the arts and sciences. Plato, with his dreams of 
the future, Aristotle with his world views of life and civilization, 
all those philosophers who in the centuries that followed inspired 
our dreams of social change and revolution, all alike when they 
dreamed their dreams of reform accepted slavery as its natural 
background and support. 

During the first centuries of. Christianity the Church of the 
Middle Ages set itself, not against the institution, but rather against 
the conditions under which it was carried on. True, from time to 
time, there appeared priests or prophets who saw in slavery itself 
a thing to shock the Christian conscience. But until the eighteenth 
century no real effort was made to abolish it. And not until our 
own time was it brought completely to an end. 

What did free humanity from slavery? If you look into the 
matter closely, yet at the same time keep the needed breadth of 
vision, you will see that in the eighteenth and the nineteenth cen- 
turies, when the slave trade was suppressed, the movement which 
was then at work was not one that was inspired by religion. It 
came to the aid of religious thought. But it was a movement of 


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liberation that was bound up with the daily work of man. That 
movement of liberation was called science. We had begun to master 
the forces of nature, and we did it to make them work for us. With- 
out knowing it, without seeing the connection between these two 
great questions—slavery on the one hand and modern industrialism 
on the other—that was how humanity brought slavery to an end. 

I believe, indeed, that what we see here is simply the working 
of a general truth that can be explained and stated in a phrase; 
call it the progress of modern intelligence seizing upon the forces 
of nature and substituting them for the labor of man. This at any 
rate is certain. The movement which ended in the abolition of 
slavery in the United States had the closest of connections with 
the industrial development of the North. 

Now, today, no one in the civilized world believes that slavery 
is still necessary—I speak of legal slavery, not of other kinds. Yet 
slavery was none the less a human institution which had its roots 
as deeply in history as war itself, an institution perhaps more es- 
sential than war, for by it was performed the world’s daily labor; 
an institution which made it possible for the world to make its 
civilization secure, while war was at least a transient thing. It 
broke out now in this quarter, now in that, and its results could be 
forgotten. 

Look into the réle played by war in history and you will find a 
parallel which holds true even in details. War, like slavery, goes” 
back to the beginning of human institutions, like slavery it has itself 
fought with the growth of science; for science has changed the 
human relationships upon which condition rest both the day’s work 
and the polity of nations. Moreover, just as practical science brought 
substitutes for labor, so its destructive inventions bring substitutes 
for the ancient ways of waging war. We are therefore at a point 
in human development in which science promises to rid us of the 
ancient institution of war just as it has been the most efficient factor 
in ridding the world of slavery. In short, human intelligence is a 
more humanizing element than anyone would suppose who thought 
of it only in terms of its battle with the forces of nature. The 
triumph over nature is now revealing itself as at the same time 
a triumph over that primitive barbarism which has remained with 
us from the period when life itself was a crude and often losing | 
struggle with those forces now within our control. 


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I believe that the Great War marked a revolution not only by 
the manner in which it extended itself over the entire world, but 
by its demonstration that a change has taken place in the essential 
nature of war, whether it be carried on by armies or navies. We 
have been brought up in the belief that war was an instrument that 
could be used at will to bring this question or that to a settlement, 
that war was an instrument that we had at all times under our 
control. The World War has made it plain that the high progress 
made in this science which kills has taken war of today out of human 
control. If you look into the preparations that are being made for 
future wars—and such preparations must be made so long as we 
have found no substitutes for war—if you are following the progress 
made by physics and chemistry, by the airplane, by poison gases, 
by explosives, you will find yourself forced to admit that the science 
of war has now so perfected itself that it is capable of destroying 
not only the most determined of enemies, but also our very civiliza- 
tion. 

Let us pause for long enough to note in detail just what science can 
really do today. There are factories now im existence which can 
do two things: they can extract nitrate of ammonia, in thousands 
of tons, to fertilize the country’s farm land, and they cam likewise 
produce explosives in quantities no less enormous, explosives having 
as their base the inexhaustible resources of air and water, explosives 
which when dropped by aircraft could in the shortest possible time 
wholly destroy an entire city. And in the next war it would be not 
merely the armed forces but the civil population as well that would 
have to be attacked. For it is above all in the laboratories of uni- 
versities and the workshops of towns and cities that war is now 
| prepared. The next war will be a war of extermination, since what- 
ever nation is attacked will be compelled to make use of this same 
kind of chemical warfare in its own defense. 

If this be understood, we need go no further to make it clear that 
science is now about to change all our previous conceptions of war, 
and that the World War marked a turning point in the history 
of war. 

Can we prevent the use of such methods in war? That is as if 
we asked, Can we block the progress of science? No. Nor can we 
limit the production of fertilizers which make rich the soil. The 
thing is impossible. Those same scientific processes which will 


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make life easier for us, which will mean bread in abundance for 
everyone, processes particularly necessary today, when everywhere 
the World War has left with us such misery—it is by these processes 
which add to life that the same factories, with very minor changes 
in their apparatus, can make these civilization-destroying explosives. 
The same scientists, with the same formulae, can make both things 
in one and the same laboratory. I remember, for example, visiting 
an establishment where, during the war, poison gases were made— 
I have no need to tell you where. In the laboratory next to that in 
which’ those poison gases were made, other chemists were at work 
to save life, and they were using almost the same formulae. The 
raw materials which went into the manufacture of the tools of death 
likewise served for the protection of life. One destroyed; the other 
cured. Before I go on, too, I will say that it was those same sci- 
entists, at work in this institution, who discovered the formula 
for the remedy for sleeping sickness; and it is quite possible that by 


doing so they will save as many lives as were lost in the recent war. © 


I say it again, those two laboratories were side by side, and the men 
of science at work in them were availing themselves of the same 
methods. 

That is what science can do. It is something that is stronger 
than we are. In the history of war we have reached almost the 
same point which in the history of slavery we reached half a century 
ago. But here the competition with science has results that are 
far more serious. We have arrived at a place in history where we 
must choose between the destruction of civilization in its entirety 


and the possibility of making secure the happiness and well-being — 


of the nations by the abolition of aggressive war. 


By now, too, we can reckon up the gains we have already made. ; 
The first may be said to have been a general agreement that itis — 
not possible to abolish defensive war. For that matter,every modern | 


war has in one sense been held to be a defensive war; for every country 
had claimed that for its part, it fought only in defense, and refused 
to admit that it was the aggressor. It was necessary then to begin 
by setting up some sort of impartial tribunal to determine who is 
to be called the aggressor. Modern countries, with their jealous 
sense of their own sovereignty, had no great desire for such a tribunal. 
They argued that it would constitute an impeachment of their 
sovereignty. Accordingly, then, something else had to be found 


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" not a tribunal, but some kind of definition, a definition which, 
accepted beforehand and by everyone should indicate automatically 
_ who the aggressor was. It was very hard to make the distinction 
called for, or to put it im scientific terminology—to isolate the 
microbe of aggressive war. Indeed, from the military point of view, 
it is not possible to make any distinction between defense and attack. 
_ For imstance, if a few kilometers from your frontier there rises a 
hill which dominates your side of it, will it constitute am aggression 
_ on the part of your neighbor if wpom that hill he establishes: arma- 
; ments capable of destroying all your towns and cities withim their 
reach, or of making easy am invasiom of your territory? Looking 
at it in another way, cam we conceive of any statesman, responsible 
for the safety of his country, who under such conditions will not feel 
that it is absolutely necessary for him to take precautionary meas- 
ures? Or, to take another instance, must we wait until am enemy’s 
airplanes are on their way to launch their tons of explosives upon 
- our cities? Every expert knows that against airplanes the only 
defense of any value is to attack them before they are on the way~ 
I speak as a realist, and 1 am compelled to recognize the fact that 
self-defense sometimes makes it necessary for us to be the first to 
) attack; and this opinion is everywhere accepted, if not by the general 
* public, then at least by those to whom the safety of the country is 
| 


| ; entrusted. The military world is therefore at one im admitting that 
_ it is frankly impossible to make any distinction betweem aggression 
4 and defense that cam be expressed in military language. 
_ What, then, could be done? 
_ The League of Nations took up the problem some two years aga 
_ It did not succeed im reaching any practical distinction; but it did 
_ nevertheless lay down one broad general’ principle which will be the 
_ foundation stone of our future law of nations—the principle that 
aggressive war is a crime. 

_ There we have a declaration which struck at the very bases of 
_ that international law whereof I have been speaking to yow im the 
present lecture. To declare before the whole world that aggressive 
_ war was a crime was a new thing and a big thing; for, until tfien, 
_ it had always been proclaimed that all states had the right to make 
t, At the same time to declare that war was a crime was going only 
_ part way, for that was a quite different thing from defining aggres- 


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sion. And to solve this problem we, in America, sought to find a 
formula. In fact we threw on the table a formula that was revo- 
lutionary. We said: The aggressor is that country that goes to 
war while refusing arbitration, the country that refuses to submit 
its case to a tribunal, refuses to avail itself of the pertinent means 
which in time of peace it had agreed upon as well fitted to set such 
differences right. 

To put one’s hand upon the aggressor, then, was no matter of 
learning who was first to cross his neighbor’s frontier, but of learning 
who would refuse to lay his cause before a tribunal of arbitration 
or other pertinent body. Here too we have something that is more 
than a definition. It is a demand that war shall be replaced by 
something else. That is, it is the virtual finding of a substitute for 
war. As such, and at Geneva a year ago, it was first accepted 
by Mr..Ramsay Macdonald, the Prime Minister of Great Britain 
and M. Herriot, the Prime Minister of France. Then it was adopted 
by the representatives of the governments forming the Assembly 
of the League of Nations. And now it forms a part of the protocol 
of Geneva. Indeed, a week ago at Locarno there was signed an 
agreement which is like the dawn of a new day for Europe and the 
world. And if you will read the text of that agreement there too 
you will find the same definition and conception of aggression. You 
will see that England gives its guaranty as between France and 
Germany if such a situation should arise between them as we have 
been envisaging. If a war situation should arise between those 
two powers, England has given her word that she will herself go to 
war against that power which refuses the arbitration of the Perma- 
nent Court at the Hague in the case of questions in international 
law, or refuses arbitration, or the Permanent Commission of Con- 
ciliation. In like manner France and Germany each guarantee 
each other against any violation on the part of other nations un- 
willing to avail themselves of the processes of arbitration and 
conciliation. 

That is the new conception which made possible the pact of 
Locarno. From now on, among the great European powers and 
without any argument, the aggressor will be he, I say it again, who 
will go to war refusing arbitration. 

This is the progress that has been made possible by a new thought, 
a new conception. Not that this means that the question has been 


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157 


settled absolutely and for all time to come. But it does mean that 
the first step has been taken. Even if the great powers accept this 
conception there will still remain many obstacles before we can apply 
it. Above all it calls for a wholly new kind of education in the science 
of statecraft. 

I have pointed out that hitherto it had been made a principle 
both in the practice and the theory of statecraft that every state 
was the one judge not only of its right and freedom to go to war 
but likewise of the justice of its cause. Can such rights be given up? 
Can any country renounce them and entrust them to others, to 
neutrals, to those that we do not feel are as well qualified as we are 
to judge of the justice of our cause? Are nations truly ready to 
accept this formula, or will they be when they are facing a crisis? 
Only think what the thing means. The formula of Locarno—that 
formula which was behind the protocol of Geneva—demands that 
in place of going to war we accept the judgment and the sentence 
of others. 

I admit that this method of settlement will not give a great power 
that hope of winning its case which it might be given by force. I 
will even admit that if a country accepts the formula of Locarno, 
very often it will lose its case. What will seem only justice to others, 
will not seem so to it. So that a country may well ask itself, Is it 
truly necessary to accept this definition of aggression? It is—yes— 
if we are to have peace, for it is the first step in the control of war 
itself. 


As you see, the problem leaves a situation that is still far from 
simple; and new problems are constantly arising. 

However, once more I ask you to look into the pages of history. 
Those of us who think that justice is an absolute thing should read 
history. For human justice is always imperfect and relative. Our 
justice, the justice that we accord to others, the sort of justice that 
others accord to us, none of these things is a justice which is ab- 
solutely just. I ask the question of you who are here present; 
in your own lives have you always obtained that justice which you 
felt was due you? Absolute justice? 

There is no such thing as absolute justice in human affairs. The 
most we have been able to do is to create an instrument which can 
be made a safeguard against the abuses of power, against crimes 


fags 


158 


that have been recognized and defined; we have that safeguard in 


our tribunals, which we then call tribunals of justice. We have — 


set up systems of law by which we seek to make live, at least once 
in a while, the elements of justice. If we insist upon obtaining 
absolute justice—that is, the sort of justice we demand for ourselves— 
we shall simply find ourselves going back to the war conditions of 
uncivilized tribes. If however, we are willing to yield a little, we 
shall yet work out a system that will give us, other things being 
equal, the maximum of justice. That is the history of courts of 
justice, it is the history of civil and criminal law. 

Well, the same sort of development must take place among na- 
tions. We must be ready to say not merely that that nation which 
goes to war refusing the arbitration of the Permanent Court or that 
of the Court of Conciliation is a criminal. We must likewise be 
ready to admit that this criminality shall be followed by the same 
consequences as it would be in private life. If nations at war can 
be differentiated, if before all the world we can point out which is 
the victim and which the criminal, we can then set up some system 
of justice which will really be a substitute for war. And the whole 
history of jurisprudence teaches us that progress lies in the estab- 
lishing of the tribunal and the trying of cases rather than in the 
enunciation of fine principles. I do not know if I have made myself 
clear. But read history and make your own comparisons with 
conditions as they are today, and you will see that we are now at the 
beginning of an international movement which is almost the same 
as that social movement which brought about the creation of those 
local courts before which the citizen learned to lay his case. 

If this is true, the ‘definition of aggression isa thing that is much 
more than a mere definition, for it gives us the right to hope that 
we may sometime be able to bring aggression to an end by building 
up the institutions of justice itself. 


You see what I conceive the situation to be. That is what has 
been done at Locarno, at Geneva, and at the Hague. We are look- 
ing for that thing that will take the place of war. . 

The first obstacle we encounter is that challenge to sovereignty, 
the fear which the modern state feels that it will no longer be free 
to make war even when it feels it must protect itself or defend the 
justice of its cause, the fear that it may lose at one and the same time 


[18 ] 


¥ 
3 
“] 
" 
’ 


159 


both its freedom and its security by being thus compelled to resort 
forthwith to the instruments of peace. 

I am not a pacifist in the old sense of the word. I believe there 
is no peace movement that can hope to succeed if it does not admit 
the legitimacy of self-defense. I believe in the right of the individual 
to defend himself against the attack of others. I believe in his right 
to defend his family, his fireside. And I believe in the right of de- 
fending one’s country. It is a right which involves not only all the 
natural feelings of human society; it also constitutes a basis for the 
safety of future generations. It is impossible to conceive of the 
success of any peace movement which will not take into account this 
necessity of self-defense. It follows, too, that if defense cannot be 
distinguished from aggression we shall always have war. But on 
the other hand, as we stated above, if we can bring aggression to 
an end there will no longer be any need for defense. 

The process which brings wars of aggression to a close in the 
world’s history is a long one and may extend far beyond our lives. 
During that process the need for defense will continue. Defensive 
wars, then, may happen just in proportion to the number of ag- 
gressive wars which would violate the process of building upa peace- 
ful world. These defensive wars might be thought of in terms of police 
action, wars to safeguard the world’s gains as it moves toward peace, 
and to. protect the treasures of civilization in the interval. 

If you grant the possibility of such wars of defense (or police 
wars), they, too, may be and almost certainly would be looked 
upon as aggressive by the other side. I admit this difficulty and 
agree that it is not enough merely to define aggression and brand it 


_asacrime. It is not enough to state our ideals in terms of a single 


; 
5 


formula. We must likewise apply the experience of history. The 
great lawmakers of Rome did not find it enough to lay down defini- 
tions—although no definition can ever surpass that which defined 
justice, in the opening words of the Institutes of Justinian, ‘‘ Justice 
is the fixed and constant purpose which gives to every man his due.” 
Definitions such as this were not arrived at by philosophic reasoning; 
they could not be reached until history itself had revealed and 
tried out a fixed and constant process for the attainment of this end. 
The phrase was the crystallization of experience. The jurists were 
registering achievement, as well as indicating an ideal. 

In the same way, our present generation has reached certain 


[19] 


160 


general ideas as to the possibilities of peace and the outlawry of 
aggressive war. But it will not be until years have passed and until 
future generations have done much blind groping, that permanent 
peace will finally be won. I am not one to be discouraged, if now 
here, now there, wars still break out. Murder still continues, al- 
though there is a law and there are courts designed to prevent it. 
It is only by experience that we can reach the solution of any diffi- 
culty. It is not by invoking untried ideas, but by the hard and ob- 
stinate work of responsible statesmen, who at every step will have 
to determine if the time has come to apply a new solution to the 
situation there facing them,—it is only by their action that the 
result will be attained in its finality. With the passing of time, 
and always more and more, we shall find in our international tri- 
bunals the true instruments of justice and of peace. 

I do not believe that it is enough to say, as it is so common to 
say, in the United States, that war can be blotted out by Permanent 
Courts. They are not enough, because the majority of questions 
which will lead to war are not the legal irritations which arise be- 
tween countries. I believe accordingly that our definition must be 
made more subtle, more malleable, and at the same time strong 
enough to be able to take hold of all sorts of diplomatic obstacles, 
such, for example, as those that may arise outside of international 
law. That this need not be difficult is very well illustrated by that 
formula which is at the very center of the pact of Locarno. We must 
bring together both elements in international relations, the elements 
that are political and the elements that have their source in codes and 
courts. But all that is only a question of time, of experience. 

To make an end, I believe that the movement toward justice is 
already sufficiently far advanced to constitute an historical phe- 
nomenon. I believe that this generation, which has gone down under 
a catastrophe without parallel—this generation which has suffered 
as no other has ever suffered in the past—can serve the cause of 
peace—peace reached by the paths of justice—with more fervor, 
with more intensity, than any generation in the immediate past or 
future. In any case, it is our duty so to do. 

I went this afternoon to that spot where lies the unknown soldier 
of your army, and before his grave there came back to my mind the 


undying words of our Lincoln, those words spoken by him upon 
the field of Gettysburg, 


[ 20] 


161 


“that from these honoured dead we take increased devotion 
to that cause for which they gave the last full measure of de- 
votion; that we here highly resolve that these dead shall not 
have died in vain.” 
The cause for which they died was not only that of the safety of 
their country but that of peace through security. I see this security 
as a thing henceforth safeguarded not merely by the instruments 
of war, but much more by the growth of justice. For if, as I have 
said, from now on war will be no longer under the control of men, 
then it will not safeguard us, and in its place we must put something 
which will be under our control. The time when war was a weapon 
which one could use as a safe means for insuring our lives and the 
life of our nation, is gone; today war is like an explosion, and an 
explosion that must recoil upon the nation which lit the fuse. 

For five years I have had the task of examining the effects of war 
throughout all Europe, its effects that are economic and social. 
I have no need to tell you that such a task has uncovered for me 
economic and social effects of war in every country, both belligerent 
and neutral, which make clear how great a menace is modern war, 
a menace not only to the institutions of liberty which have been won 
by the effort and sacrifice of so many generations, but no less a 
menace to that heritage of culture, of art, and of creative science 
which is the basis of our civilization. But greater than all the loss 
of wealth there is another which above all we must not forget. That 
is the loss of lives. And have you ever thought what that loss of 
life in the late war was? [If all those soldiers who fell could rise from 
their graves, could take rank again, four deep, in their regiments 
and companies, this army, a spectral army but a real one, would 
extend, in its columns of four, from Constantinople to Paris. All 
these lives have been sacrificed, and sacrificed, I think, for some- 
thing! 

Who, among statesmen, will in future dare to take upon his 
shoulders the responsibility of a new war, when it is possible to save 
so many lives for the Fatherland by the adoption of principles in 
international affairs such as are merely those we make use of im the 
home affairs of a nation. That may seem, too, to be making no very 
great change; but in truth such a change would carry with it one of 
the greatest revolutions in history. Can we bring it about? That 
is the question that our generation must face. 


C2r ] 


162 


THE POSSIBILITY OF A BALKAN LOCARNO 


BY DAVID MITRANY 
Special Correspondent for Southeastern Europe, Carnegie Endowment 


With the recent peace settlement a new era has begun in the 
region commonly spoken of as The Balkans, which includes the 
states formed by nations formerly subjected to the Turks in south- 
eastern Europe. For almost exactly one century, beginning in 1821 
with the rising organized by the Hetairia under Ypsilanti, these 
peoples struggled to assert their nationhood. Step by step they 
advanced toward independence, shaking off the Turkish rule several 
decades ago. But that was only a partial redemption, and what 
seemed dimly a far-away goal was only reached by the tragic chance 
of the Great War. Now each people has gathered its kindred to- 
gether under one flag. Excepting minor disputes, in the border re- 
gions of mixed populations, the nationality struggle has come to an 
end in the Balkans. Unfortunately, this has not yet brought peace 
to the region. Quarrels and threats of conflict remain as frequent 
as in the past; the Peninsula would seem determined to live up to 
the reputation which has planted the verb “to balkanise”’ in common 
parlance as connoting perpetual division and strife. Whether these 
quarrels have any substance or not will be discussed later on. Here 
I am concerned with one of their effects in the west, which has been 
to bring up of late with frequency the question from those who take 
an active interest in world peace whether nothing could be done to 
bring peace to the Balkans by means of a Balkan federation. 

It is not a new idea. In fact, the idea of federation has perhaps 
been nowhere so popular as in the Balkans. But the forces against 
it have unfortunately proved much stronger than those for it, and 
I fear that even now it is much too early to work for it in a practical 
way, tackling it as a full-fledged possibility. Yet is there nothing 
to be done towards furthering that ideal? Is there not some first 
step by which we could begin now to move towards it? Since the 
happy events of last autumn a new form of friendly agreement has 
been devised for keeping the peace among neighbouring states, and 


[22] 


163 


a question now often asked is whether there is any possibility of 
bringing to life a Balkan Locarno. Before discussing the chances 
of such a simpler form of Balkan agreement it would help us to 
consider briefly past suggestions for a federation. The reasons which 
caused those suggestions to be made and those which caused them 
to fail are probably still active and may give us some clue as to the 
best line to follow and to the pitfalls that need to be watched. 


HISTORY OF THE FEDERATIVE IDEA 


One general point worth noting, before referring to actual pro- 
posals, is that the geographical factor has probably been an obstacle 
rather than a help to Balkan unity. At first sight few regions seem 
physically more harmonious than the well-defined Balkan Peninsula. 
But when one looks more studiously into its character the variety 
of features and of types becomes bewildering. At any rate, history 
makes it plain that the Peninsula’s apparent geographical unity 
was not such as to favour a uniform demographic and political evolu- 
tion. For though first inhabited by two very able groups of peoples— 
the Thracians and the I|lyrians—who have been the primary racial 
stock of all the Balkan populations, the region has never been able 
to reach unity and to play in history a great part like the neighbour- 
ing Roman Peninsula. Neither the Byzantine nor the Turkish 
empires have been able to overcome these geographical obstacles, 
which appear very strikingly as soon as one sits down to consider 
the possible lines of a Balkan federation. A federation must on the 
whole represent a clearly defined rotundity of common interests. 
If it is to be viable none of its members should be tied to extra- 
federal issues of a kind that might eventually tug that member away 
harder than the issues which have brought him into the federation. 
But if the treaties of the Little Entente, if the Rumanian-Polish 
alliance, if the Greek activities in the Mediterranean are not merely 
the whims of politicians, they must represent precisely the kind of 
centrifugal interests which would always be straining at the rivets 
of a Balkan federation. 

Nevertheless, a Balkan federation appears in Balkan political 
programs as regularly as olives at a Greek table. The fifty-page 
pamphlet, in which the newly formed Radical-Democrat Rumanian 
Party expounded its program ended with only two ideas on external 
policy, expressed in just six words: “National Unity and a Balkan 


[23] 


164. 


Federation” (1888). In the minds of the revolutionary leaders who 
prepared and carried through the struggle for national independence 
their own particular cause always was part of a common Balkan 
problem and hope. Not only their ideals, but also their practical 
needs caused them to think of linking hands, for the simple reason 
that they all had one and the same enemy—the Turks, on the one 
hand, and the interfering Great Powers, on the other. Soon after 
he came to rule in Rumania Prince Carol was offered by Serbian 
Prince Mihail “a Balkan federation for the purpose of resisting 
anyone who might cast covetous eyes on Constantinople.”’ If their 
national ideal led them to want a federation, it was largely because 
a federation seemed the shortest cut to their national ideal. 

I do not mean to depreciate the fine spirit which animated those 
revolutionaries. But it is important for the handling of our problem 
to have it straight in one’s mind that a strong reason for the popu- 
larity of the federative idea has been the momentary practical needs 
of the struggle for national independence, much more than some 
inner urge fed by a sense of common nationality, or some other 
common emotional trait, or perfect identity of aspiration. To justify 
this assertion we need merely glance at the various proposals for 
federation put forward at one time or another. Even if we take into 
account only those of more recent years, when the problem had 
acquired sufficiently clear outlines, they show a surprising variety 
of details, tending to confirm the variety of interests suggested by 
the geographical factor. Let us look at a few examples. In 1905 
there appeared a proposal for ‘‘An Eastern Confederation as a Solu- 
tion of the Eastern Question.’’ It was attributed to the late Ru- 
manian statesman M. Take Ionescu; he denied authorship, but it 
certainly was inspired by elements influential in Rumanian politics. 
What they advocated was a Balkan federation under the leadership 
of Italy. A similar arrangement was also favoured by a Serbian 
who carried much weight in his own country—M. Vladan Georgevic. 
This agreement of Serb and Rumanian, as well as the inclusion of 
Italy, shows that the federation’s point was to be directed against 
Austria-Hungary; a policy that was not purely Balkan and which 
must have appealed but indifferently to Greece and Bulgaria. 
As an evident counter to such thoughts a writer signing ‘‘ Pere- 
grinus” (said to be an important Viennese politician) published in 
the ‘‘Oesterreichsiche Rundschau” for February 15, I910, an 


[24] 


165 


article on the ‘‘ Danubian United States.’’ His idea was a federation 
of Serbia and Bulgaria, with perhaps Rumania included; they were 
to retain their dynasties and parliaments, but they were to be 
linked up with Austria-Hungary in the same way in which the 
southern German States were attached to Prussia. The system 
was to rest on a customs union, a common bank of issue, a common 
economic assembly and a common army. Good results, the author 
believed, were certain to be produced by such a gathering of forces; 
and he, therefore, expected that sooner or later Turkey would be 
tempted to join in. Here apparently we have to do with a wish to 
group together the peoples strewn along the route of the Bagdad 
railway. Meanwhile the annexation of Bosnia-Herzegovina by 
Austria was bringing things to a head. Some people thought it 
necessary to prepare for the conflict that was looming darkly on 
the political horizon; others thought it preferable to try to prevent 
it. Two proposals representing these two points of view were put 
forward about that time. M. Kosta Stojanovi¢, a Serbian ex- 
Minister of Agriculture, writing on ‘‘The Situation of Serbia after 
the Annexation of Bosnia-Herzegovina,’’ advocated a federation 
of Serbia, Bulgaria, Montenegro, Rumania, and Turkey. The other 
current pressed for an Austro-Hungarian-Serbian customs union; 
the deputy Bauernreither pleaded for it in Vienna, and he was 
seconded in Belgrade by the deputy and university professor J. 
Peri¢. A more frequent and more natural view simply stood for a 
Serbo-Bulgarian, that is fora Slav union. The two countries made a 
beginning in 1905, when they signed a treaty setting up a customs 
union between them; the treaty was ratified by the Sobranje, but 
before the Skup¢ina could do the same Austria intervened and 
forced the Serbian government to drop the project. 

These few examples lead to a very plain conclusion: there were 
two factors constantly recurring which impeded progress. In the 
first place, there was the diversity of interests of the eventual mem- 
bers, as evidenced by the variety of schemes for their federation, 
and, in the second place, there was the actual or dreaded inter- 
ference of outside Powers who stood to lose from the association 
of the Balkan States. I have mentioned one action of Austria. 
When in 1887 Stambuloff offered a personal union of Bulgaria and 
Rumania under Prince Carol the latter refused, well knowing that 
acceptance would have meant instant attack by Russia. And not 


[25] 


166 


only the political but also the economic interests of some of the Great 
Powers stood in the way. The question of a Balkan federation was 
closely examined by the Rumanian economist Xenopol in 1911, 
when he concluded against it. Of course, he knew very well that 
Rumania could derive great economic advantages from such a fed- 
eration, but he reminded his readers that “‘the industrial countries 
which dominate the Bulgarian and Serbian markets would not let 
themselves be ousted without putting up a fight. Such a policy 
could only be thought of on the day when economically and finan- 
cially Rumania would be altogether independent.’”’ Considerations 
of the kind put forward by Xenopol still hold good, a fact to be 
remembered by those who may think that a Balkan union merely 
depends on the good-will of the Balkan States. We all know how 
fervently the Succession States have been advised to ease the 
customs barriers between them. But when three years ago two of 
these states wanted to conclude an agreement which was to grant 
to one facilities for its foodstuffs and to the other facilities for its 
textiles, they were promptly rebuked by a neighbouring Great Power 
who also had textiles to sell. I believe the probable interference of 
outside interests to be the chief obstacle to a Balkan customs union, 
which otherwise would be as practicable as it is desirable. 

I have spoken of proposals for federation and of the two sets of 
factors which balked them. These factors were clearly seen at work 
in the one case when outwardly the union of the Balkan peoples 
seemed actually to have come about, in the Balkan League of 1912- 
13. When Serbia, Bulgaria, Greece, and Montenegro stood together 
united in a common purpose, the embryo, at least, of a federation 
appeared at last to have been born. Reality was painfully different. 
The Balkan League was not the expression of a common Balkan 
purpose but, on the contrary, of the separate and mutually antago- 
nistic aims of the four states concerned. This was true of the form, 
as the League rested not on a joint compact but on a chain of separate 
treaties (between Bulgaria and Serbia, Bulgaria and Greece, and 
Serbia and Greece); and it was more true of the substance, as was 
sadly proved by the bitter conflict that broke out among the con- 
_ federates when it came to minting the common victory into political 
coin. The second factor, the part played by certain Great Powers 
in the collapse of the Balkan League, is by now current history. 
So that the Balkan League has been far from disclosing the first 


[26 ] 


167 


elements of an inter-Balkan community, but has rather shed a 
glaring light on the two main obstacles in the way of federation. 

Already in 1887 Laveleye was exalting “that immense and 
splendid crystal in course of formation, the Balkan federation.” 
With unconscious precision the distinguished geographer chose a 
metaphor which put the question in its true perspective. It is to 
be practical, not pessimistic, to admit that a federation is not an 
issue for the near future. It is true that with the collapse of Russia 
and of Austria-Hungary one of the two obstacles of which I have 
spoken has been much reduced. But the same reasons which made 
them an obstacle also made them a stimulus, and with the disap- 
pearance of the Austrian and Turkish empires the main incentive 
for federation in the past has gone. Occasional uneasiness is now 
only caused by Italy’s sporadic declarations that she must have room 
to expand. They have had the curious and, for our argument, 
illuminating effect of making even the extreme nationalists of Angora 
call for a Balkan federation, supported in Constantinople by the 
rejuvenated ‘‘Ikdam,” and more recently in Angora itself by the 
semi-official ‘‘Hakimietti Miliet,” though such a federation would 
include the old enemy, Greece. And to that lessening of pressure 
on the circumference must be added the growth of centrifugal 
interests within the Balkan circle. The diversity of interests has 
been accentuated by the expansion of some of the states far beyond 
their Balkan confines. Since the war the political centre of gravity 
in southeastern Europe has moved northwards. Lately, therefore, 
a Danubian federation has been as much or more in peoples’ minds 
than a Balkan federation; and as the first would have to include. 
the two chief Balkan states, Rumania and Jugoslavia, its boundaries 
would cut deeply across the traditional field of the second. We 
must wait for a federation until events shall have welded the south- 
eastern European states into some strong community of interests, 
either economic or strategic, or perhaps in the sphere of world politics, 
if for instance their interests as a distinct regional group should be 
found to require joint handling in a World League. 


A BALKAN LOCARNO 
As one cannot at present count upon a federal development for 


securing peace to the Balkans, is there any chance of achieving that 
by means of a Balkan Locarno? I do not know of any definition 


[27] 


168 


which lays down the meaning of this now popular expression. By 
some it is apparently used simply as meaning a spirit of friendly 
compromise among past or potential disputants. What interests 
us, however, is the machinery for peace invented by those who 
framed the treaties of Locarno, and its possible use elsewhere. In 
that sense one might define Locarno as ‘‘a system for the peaceful 
settlement of disputes based on the international status quo.” 

To dispose of a preliminary point, is this last condition indis- 
pensable in the Balkans? The answer undoubtedly is: more than 
anywhere else. Whatever opinion one may hold concerning the 
present Balkan frontiers, it seems inevitable that all agreement must 
begin with their frank recognition by the countries concerned. 
It is true that Germany has not recognised the Polish frontier, 
but has only bound herself not to go to war or to claim arbitration 
with regard to it. Yet Bulgaria can hardly afford to adopt a similar 
attitude. For though frontier questions might be formally excluded 
from arbitration too many other issues depend on them. If frontiers 
remain contested, this may stiffen the attitude of both sides on dis- 
armament, control of railways, traffic and passport regulations, and 
especially on the question of minorities. Naturally, the minorities 
problem is most acute in the regions of newly traced frontiers, 
and what government would handle the populations concerned with 
a gentle hand were it to know that their sentiments or their language 
or their mere existence at that spot may at any moment be made a 
ground for claiming a change of frontier? The chief practical 
consideration, however, is that Bulgaria, unlike Germany, cannot 
afford to sit tight. It is she who is mainly in need of concessions. 
If she denies the frontier she will get no concessions, and without 
concessions a Balkan Locarno will be either impossible or useless. 

Admittedly, some such pacific agreement would be useful. But 
it will not be easy to achieve, and one may, therefore, legitimately 
ask whether one had not better wait and see how relations mature 
instead of addressing oneself now to such a stiff task. The answer 
is that such a general understanding may be lost, to this generation, 
at any rate, unless it is achieved now. One gets a graphic impression 
of how urgently it is needed by glancing, and gasping, at the uncon- 
scionable number of partial understandings which have been mooted 
within the last three years. Here is a realistic list of the various 
combinations discussed: 


[28 J 


-. 


| 


; 


169 
1. a Bulgarian-Jugoslav agreement, or customs union, or 
federation; 
2. a Turkish-Greek understanding; 
3. a Greek-Bulgarian understanding; 
4. a Greek- Rumanian alliance; 
5. a Greek-Jugoslav-Bulgarian understanding; 
6. a Greek-Jugoslav-Rumanian understanding; 
7- an Italian-Jugoslav-Rumanian understanding; 
8. a French-Jugoslav-Rumanian understanding; 
9. a French-Jugoslav-Italian-Rumanian alliance; and 
to. a Greek-Jugoslav alliance. 
Some of these, or parts of them, have actually come into being, 
namely: a French-Jugoslav alliance; a French-Rumanian alliance; 
an Italian-Jugoslav understanding; an Italian-Rumanian under- 
standing; a Greek-Jugoslav alliance. Note that the wider plans have 
not matured, and that only bilateral treaties have come to fruition. 
And these, as any of the other projects would be, are additional to 
those treaties which already existed, like the Jugoslav-Rumanian 
and the Polish-Rumanian alliances. Now some of these plans may 
have been little more than the schemes of politicians who sill think 
that security and prosperity are proportionate to the number of 
written alliances they carry in their pockets. But that would be 
much too simple an explanation of that diplomatic bustle. As they 
say in Rumania, “‘no smoke without a fire.” Taken at their lowest 
common meaning these many plans reflect a serious state of unrest 
in Balkan political opinion. It may be a purely psychological un- 
rest, or it may spring from practical grievances; probably it is a 
mixture of both. But it represents in any case a pathological state 
of things which must be speedily attended to; for the longer it is 
allowed to persist without sound remedy the more likely it is that it 
will tempt those whom it hurts to try some political quack-cure. 
This may seem to reflect unkindly on some of the schemes men- 
tioned before. At least two of them contemplated direct agreement 
between recent belligerents and might therefore appear to have been 


_ a genuine offering of the olive branch. On closer inspecting them, 
| however, they all without exception reveal themselves, through 
their admitted or obvious purpose, as being of the type of the Little 


Entente treaties. Even the much-discussed rapprochement between 


_ Bulgaria and Jugoslavia, so clearly natural and desirable, was not 


[29] 


170 


thought of by all its advocates as an act of reconciliation and a 
pillar of peace.t_ The other understanding envisaged by two former 
enemies, Greece and Turkey, was clearly inspired by common fears 
of trouble in the eastern Mediterranean. In short, the mainspring 
of these projects was strategic rather than administrative; they were 
intended to prepare for some defensive or offensive military task 
and not for constructive international government. These strategic 
considerations may be very real and the treaties relating to them 
perfectly legitimate. The latent rebellion of Hungary against the 
peace settlement has forced her neighbours to secure their interests 
by means of the three-cornered Little Entente; the system has 
effectively and, on the whole, reasonably fulfilled its purpose, but 
it has done little more than that. It has not mitigated the constant 
friction between Rumania and Jugoslavia caused by the treatment 
of their respective minorities in the Banat. 

It may be said, however, that an agreement between Jugoslavia 
and Greece would imply the settlement of the issues outstanding 
between them, and that it would thus be of a constructive character. 
That side of it indeed would be usefully constructive. But such is 
the complex nature of Balkan relations and of the various Balkan 
problems that it seems impossible for any two countries to conclude 
a separate treaty without making it appear to be directed against a 
third. A Greek-Jugoslav treaty would appear to be directed against 
Bulgaria, with whom the two countries have a common quarrel 
over the minorities; a Jugoslav-Bulgarian treaty would seem to 
threaten Greece, with whom the two other countries have a contest 
over Aegean outlets; and so on. It is worthy of note that the more 
frequent advocacy of a Bulgarian-Jugoslav union has roused in the 

1Jt will be remembered that in the treaty of Neuilly Bulgaria had been promised an 
outlet to the Aegean. Later she was offered some kind of free zone at Dedeagatch, but 
this she considered unworkable. Three years ago, during the Stamboliski régime, everyone 
in Sofia was insisting that Bulgaria must have Dedeagatch as her own. Last year that name 
seemed altogether forgotten. If one asked about it, the idea was waved aside with financial 
and technical arguments on the difficulty of constructing a harbour there. Instead every- 
one was now openly saying that the only possible outlet would be at Kavala. When one 
further heard that some prominent members of the government were actively working for 
an understanding with Jugoslavia it did not need much perspicuity to suspect a relation be- 
tween those two changes of mind. Toa plain question, a former and probably future Prime 
Minister disclosed the aim behind the new policy. An alliance with Jugoslavia could give 
her Salonika, and Kavala to Bulgaria without it being perhaps necessary to fire a single 
shot. He added that if he were to come to power, which then was quite on the cards, 
this would be the first task he would try to carry through. This point of view was bound 
to find some echo in Belgrade, though there is no evidence for saying that it represents a 
settled policy in either of the two capitals, especially as both have since had a change of 
government. But it is a possible policy unless the problem of the Aegean ports is settled 
with practical sense. Incidentally this issue supplies a striking example of how unsolved 


problems are apt to get from bad to worse, and also of how in the Balkans an understanding 
between two countries may turn out to be but a crab-like step towards peace, 


[ 30 ] 


171 


Rumanian Press the fear of a new Slav danger; and it is even more 
significant that the articles in question at once found a sympathetic 
echo in Athens. The upshot was the broaching of conversations for 
a Rumanian-Greek alliance. In short, everyone, so to speak, has a 
quarrel with everybody else, and the compounding of one quarrel 
is promptly taken to mean that the two parties want a free hand, or 
want to join hands, for handling more forcibly their quarrels with 
a third party. It is a very peculiar state of things in which any 
separate agreement, though perhaps useful and innocent in itself, 
seems predestined to be countered with a less useful and innocent 
agreement between the parties outside it, or at least to rouse them to 
deep suspicion; and either of these effects must be a fresh obstacle 
to the setting up in the Balkans of a general Locarno system for 
the peaceful settlement of disputes. 

The recent agreement between Greece and Jugoslavia offers a 
good touchstone for these views. Just before his fall, General 
Pangalos did a good piece of work by settling the important and 
dificult Salonika issue. Greece and Jugoslavia. concluded four 
technical conventions under which the Salonika-Ghevgheli railway 
is to remain Greek, Jugoslavia ceding to Greece the rights formerly 
belonging to the Oriental Railways Company and recently acquired © 
by her for twenty million francs. The Salonika Station remains 
Greek under a Greek station master, while Ghevgheli station is to 
be used jointly by both countries. This is an excellent piece of states- 
manship, which gets rid of one real Balkan problem. How, then, 
does this arrangement affect the argument that the partial settle- 
ment of the quarrels of any two Balkan states may actually hamper 
rather than advance a general agreement? In the same week in 
which the Salonika conventions were signed there occurred two other 
events which form a good commentary to that argument. The first 
was that Greece and Jugoslavia, besides the four technical conven- 
tions, also concluded a “Treaty of Entente and Friendship,” officially 
described as ‘‘purely defensive.”” The whole, therefore, seems to 
have been a double-barrelled bargain, one barrel being loaded with 
confetti but the other with powder.? Secondly, within a few days 

?The Greek-Jugoslav conventions were not made public by the Pangalos régime- 
What transpired about them has, apparently, been sufficient to rouse in Greece widespread 
and influential opposition against their ratification. The main reasons for that opposition 
are the following: the Salonika Conventions are concluded for fifty years, but the Treaty 
of Friendship for only three years; Jugoslavia was granted the right to use her free zone 
not only for her own traffic but also for the transit of other countries, which is excessive, 
and in time of war might give rise to complications; the Salonika-Ghevgheli line will be 


C31] 


4 
172 


of the signing of that Treaty a joint démarche was made by the 
Greek, Jugoslav, and Rumanian Ministers at Sofia to demand from 
the Bulgarian Government a more effective repression of the komi- 
tadjis. This in itself is very telling. But note the further conse- 
quences. The Italian authorities are convinced that Greece and 
Jugoslavia have further concluded a supplementary secret treaty 
directed against Italian aspirations in Albania and Bulgaria. The 
semi-official ‘‘ Messagero”’ declared that Italy would never abandon 
her influence in those regions and characterised the whole affair 
as ‘‘a new and obscure chapter in the Balkan situation.’”” Rome 
promptly took steps to safeguard herself against any dangers 
lurking in that obscurity. At the end of September it was announced 
that a mission was due in Bucarest composed of Prince Humbert 
of Italy, Signor Federzoni, Minister of the Interior, Signor Grandi, 
Secretary of the Foreign Office and General Badoglio, charged with 
conveying to Rumania’s King and Queen an invitation to visit 
Italy; this fastidious courtesy having to be set against last year’s 
conduct of the Italian Government who then bluntly discouraged 
the wish of the Rumanian monarch to visit Italy, on the ground that 
Rumania had not yet settled her debts. And early in October the 
Bulgarian Foreign Secretary, M. Buroff, visited Rome where he 
is said to have had important conversations with Signor Mussolini.3 
On the other hand, after delaying several weeks, the Bulgarian 
Government, against all expectation, returned a somewhat stiff 
reply to the joint démarche of her three neighbours. Here is the 
comment of the influential Belgrade ‘Politika’: ‘If we have had 
no other success we have at least disclosed the path which our policy 
must not follow. The only thing to regret is the necessity of pro- 
ceeding towards the goal of integral Jugoslavism by means of efforts 
which it would have been possible to avoid were it not for the revival 
of the methods by which Bulgarian diplomacy was distinguished 
in the time of Ferdinand.” 

Is there any connection between Italy’s indignation and Bul- 
garia’s obstinacy? Whatever the reply, it leaves unaltered the 
evident and painful fact that relations between the Balkan States 
under Greek administration, but there will be also a Jugoslav Commissar and, what is 
worse, also a French Commissar, who is to have power to decide in disputes between the 
Greek manager and the Jugoslav delegate. The latest news suggests that the new Greek 
chamber will demand important amendments before approving the Conventions, so that 
the whole problem hangs fire once more. 


3 Since then it has become known that both Rumania and Bulgaria have entered i 
Treaties of Friendship with Italy. oe 
[32] 


173 


as well as between them and their neighbours have been complicated 
rather than simplified by the Greek-Jugoslav settlement. Unless 
a general understanding is soon brought about it will be but natural 
to hear before long that the Greek-Jugoslav move has been countered 
with some other separate alliance. The lesson which, therefore, 
emerges with sharp insistence from that uniquely tangled state of 
things is the need, the urgent need to begin with an arrangement 
no matter how limited in scope but all-inclusive in extent. The 
obvious line of approach would seem to be a round-table conference 
of the six states concerned (Rumania, Jugoslavia, Bulgaria, Albania, 
Greece, and Turkey) for the purpose of working out, first, a system 
of mutual support against armed attack on the existing frontiers 
and, second, a general system for the obligatory arbitration of 
differences and disputes among them. This‘might prove an occasion 
upon which the separate or general grievances of the participants 
could also be usefully aired; but this must remain on the second 
plane. To wait until each of those grievances shall have been as- 
suaged by diplomatic methods may mean, in the present atmosphere, 
the indefinite postponement of an arbitral system for the Balkans. 
_ While any attempt to deal with them in detail at the first conference 
or to enlarge the scope of the essential general treaty by bringing 
_up such issues as customs union, etc., would probably end in merely 
reproducing at the conference table the barren cross-parleys of the 
last few years. 

The need for a general understanding being established, as I 
_ think it is, it remains to ask in conclusion: What general conditions 
must be given for a Locarno system to work in the Balkans? 
The historical incidents we have discussed as well as present cir- 
cumstances concur in pointing to the need of two main conditions. 
_A general understanding must rest on some common interest, and 
_ this condition can easily be satisfied, for the interest of putting an 
end to strife is general and potent in the Balkans. The corollary 
is that democracy must be genuinely in power in the various capitals; 
"without it there is no stability in foreign policy and hence no trust 
in international pacts of good-will. What is now taking place even in 
Bulgaria, but especially in Jugoslavia and Rumania, bears all the 
signs of a tremendcus democratic awakening. The moment un- 
doubtedly is propitious for action. And the second condition is 
that the outside world should really be willing to leave the Balkans 


C33] 


174 


to the Balkan peoples. One should always remember that the 
Eastern Question, which includes the Balkan question, never boiled 
over except when some European fuel was added to the Balkan fire. 
It has always been as much a European as a Balkan issue, and in 
conflict the Balkan states have all too often been the spearheads of 
the rivalries and ambitions of the Great Powers. The intrigues 
now being woven in Albania look painfully like those which in the 
past have been the thin end of the wedge wherewith the Balkan peo- 
ples have to their own and Europe’s undoing been so often split 
asunder. 


[34] 


175 


BIBLIOGRAPHY! 


Armstrong, Hamilton Fish, New Balkans (The), Harper, New York, 
1926. 
Babel, A., Bessarabie (La), Alcan, Paris, 1926. 
Baerlin, Henry, Birth of Jugoslavia (The), Parsons, London, 1922. 
“Balkanicus,” Aspirations of Bulgaria (The), Simpkin, London, 1915. 
Brailsford, H. N., Macedonia, Methuen, London, 1906. 
Clark, C. U., Greater Roumania, Dodd, Mead, New York, 1922. 
Durham, M. Edith, High Albania, Arnold, London, 1909. 
lorga, N., History of Rowmanta, Dodd, Mead, New York, 1926. 
League of Nations, Greek Refugee Settlement, Geneva, 1926. 
Marcovitch, Lazare, Probléme Constitutionnel Serbo-Croate-Slovene 
(Le), Librairie Georg, Geneva, 1924. 
Marcovitch, Lazare, Serbia and Europe, Allen and Unwin, London, 
1920. 
Markovitch, B., Balkan Economique (Le), Impremerie Graphique, 
Paris, 1919. 
Marriott, J. A. R., Eastern Question (The), Oxford University Press, 
New York, 1926. 
Reiss, R. A., Cometadji Question in Southern Serbia (The), Hazell, 
Watson and Viney, London, 1924. 
Schevill, F., History of the Balkan Peninsula (The): from the Earliest 
Times to the Present Day, Harcourt, New York, 1922. 
Seton-Watson, R. W., Balkans, Italy and the Adriatic (The), Nisbet, 
London, 1916. 
Seton-Watson, R. W., German, Slav and Magyar, Williams and 
| Norgate, London, 1916. 
Seton-Watson, R. W., Rise of Nationality in the Balkans (The), 
| Constable, London, 1917. 
Seton-Watson, R. W., Sarajevo, Hutchinson, London, 1926. 
Stavrou, M. S., Etudes Sur l Albanie, Editions Universitaire, Paris. 
Steed, H. Wickham, Hapsburg Monarchy (The), Constable, London, 
1919. 


| 1 By Hamilton Fish Armstrong, Editor, Foreign Affairs, New York. 


[35] 


176 


Stickney, Edith P., Southern Albania in European Affairs: 1912- 
1923, Stanford University Press, 1926. 

Svolopoulos, D. C., Thrace under the Hellenic Administration, Typos, 
Athens, 1922. 

Temperley, H. W. V., History of Serbia, Bell, London, 1917. 

Toynbee, Arnold J., Western Question in Greece and Turkey (The), 
Constable, London, 1922. 

Voinovitch, L., Dalmatia, Scribner’s, New York, 1919. 

Woodhouse, E. J. and C. G., Italy and the Jugoslavs, Badger, Boston, 
1920, 


[36] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, 1907 to No. 199, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
application to International Conciliation, 405 West 117th Street, New York 
City. 

214. The Advisory Ngee of the Permanent Court of International Justice 
by Manley © Hudson, Bemis Professor of International Law, Har- 
vard Law School. 

Sevceniticn: 1925. 

215. The Trend of Economic Restoration since the Dawes Reparation Settle- 
ment, by E. G. Burland, Member of the Staff of the American Section 
of the International Chamber of Commerce. 

December, 1925. 
216. Final Protocol of the Locarno Conference, 1925, and Treaties between 
I France ~ Poland and France and Czechoslovakia. 
anuary, 

217. Peasant Cites 3 in Russia, 1925, by Jean Efremoff, Former Minister 

of Justice in the Provisional Government of Russia. 
February, 1926. 
218. The oe of Pacific Relations, by J. Merle Davis, General Secretary. 


March, ft 
219. The Sine ‘Year of the aa ear Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 
April, 1926. 
220. Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 


May, 1926. 
221. Treaty-Making Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 
June, 1926. 

222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 

Rappard, H. Wilson Harris and Raymond Leslie Buell. 
September, 1926. 

223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 

in the Government of Italy. Recent Legislation in Italy. 
October, 1926. 

224. An Alternative Use of Force: When the Earth Trembled, by Richard 

J. Walsh; The Moral Equivalent of War, by William James. 
November, "1026. 

225. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 

Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 1926. 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

January, 1927. 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 

Recent Chinese Politics and Diplomacy. 
February, 1927. 

228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bruce, 
Prime Minister of Australia. 


229. Locarno and the Balkans: A Turning Point in History, by James T. 
pee cell The Possibility of a Balkan Locarno, by David Mitrany. 
Dril, 1927. 


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Davip JAYNE HILL 
ALFRED HOLMAN 
Wiuiam M. Howarp 
ROBERT LANSING 


Officers 


FRANK O. LowDEN 
ANDREW J. MontTAGUE 
Dwicat W. Morrow 
RoBErT E. OLDs 
Epwin B. PARKER 
LzRoy PERcy 
Witiam A. PETERS 
Henry S. PRITCHETT 
E.rau Root 

James Brown Scott 
James R. SHEFFIELD 
Maorice S. SHERMAN 
James T. SHOTWELL 


Smas H. StRAWN 


President, NICHOLAS Murray BUTLER 
Vice-President, ROBERT LANSING 
Secretary, JAMES BROWN Scott 

Assistant Secretary, GEORGE A. FINCH 
Treasurer, ANDREW J. MONTAGUE 
Assistant Treasurer, FREDERIC A. DELANO 


4 Executive Committee 


NicHoLas Murray Butler, Chairman 
James Brown Scott, Secretary 


AusTEN G. Fox 


ANDREW J. MONTAGUE 


HENRY S, PRITCHETT 
ELinu Root 


James R. SHEFFIELD 


Division of Intercourse and Education 


Director, NICHOLAS MuRRAY BUTLER 


Division of International Law 


Director, JAMES BROWN ScoTT 


Division of Economics and History 


Director, JAMES T. SHOTWELL 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
Drrector, NicHOLAS Murray BUTLER 


Assistant to the Director, HENRY S. HASKELL 

Division Assistant, AMy HEMINWAY JONES 
Office, 405 West 117th Street, New York City 
Telephone, Cathedral, 4560—Cabdle, Interpax, New York 


SPECIAL CORRESPONDENTS 


Sm Wriam J. Coittrss, M.P., London, England 

JEAN EFREMOFF, Paris, France. (Russia) 

F. W. ForErst™r, Zurich, Switzerland. (Germany) 
HELLMUT VON GERLACH, Berlin, Germany 

Epoarpo GiReTTI, Bricherasio, Piedmont, Italy 

CarISTIAN L. LANGE, Geneva, Switzerland 

Davi Mirrany, London, England. (Southeastern Europe) 
TsuneEjIRo Mrvyaoxa, Tokyo, Japan 


Centre Européen 


Comité d’Administration 
Paut AppeLt, France, Président HENRY LICHTENBERGER, France 
Moritz J. Bonn, Germany GILBERT Murray, Great Britain 
GUILLAUME Fatio, Switzerland ALFRED NERINCX, Belgium 
_ ALFRED G. GARDINER, Great Nicotas S. Poritis, Greece 
; Britain E. voN PRITTWITZ UND GAFFRON, 
_ Anpr& Honnorat, France Germany 
_ GEoRGES LECHARTIER, France JosEPH REDLICcH, Austria 


Count Carto Srorza, Italy 


Directeur-Adjoint, EARLE B. BABCOCK 
_ Secrétaire Générale, MLLE. M. To. PEYLADE 
_ Auditeur, Ta. RuyssEn 
Bureau, 173 Boulevard St.-Germain, Paris, France 
Téléphone, Fleurus 53.77—A dresse Télégraphique, Interpax, Paris 


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CONTENTS 


Page 


Statement by Members of the Faculty of Political Science, 
Columbia University, on the War Debt Problem, with 
Prefatory Statement by Nicholas Murray Butler 


The Interallied Debts and American Policy, by James W. 
ANRC kt Rea to hs TU he ad I LO ee ome ME SL HOE 


ibhe Interallied Debts, by F. W. Taussig . .......0.. 


The Economic Value of the Mandated Territories in Rela- 
tion to Interallied Debts, by Edward Mead Earle . . 


Letter of Frederick W. Peabody to the President ...... 


Secretary of the Treasury Mellon’s Reply to Frederick W. 
Peabody’s Letter to the President . CASS Laas 


Endorsement, by Members of the Faculty of Princeton Univer- 
sity, of the Statement by the Faculty of Political Science, 
Columbia University, with Prefatory Statement by John 
CGriemhtiopen are aie yens 0): TRIE Ye 


Secretary of the Treasury Mellon’s Letter to John Grier Hibben. 


Statement, by John Grier Hibben, in Reply to Secretary of the 
| ireasuny Wlellom's etter ss 4 3) ss eh tek See a 


Reply, by Edwin R. A. Seligman, to Secretary of the Treasury 
| CMO MRSHILE ELSIE yom ar ibmms tein eee Vio: oko «cela tai ML nem 


Betets apomircie: MEDESaa sect cle ol lar yay cine 


The Present Standing of the Debts. .... aCe IOL a Nc 


179 


STATEMENT BY MEMBERS OF THE FACULTY OF 
POLITICAL SCIENCE, COLUMBIA UNIVERSITY, 
ON THE WAR DEBT PROBLEM 


PREFATORY. STATEMENT 
BY PRESIDENT NICHOLAS MURRAY BUTLER 


The Faculty of Political Science in Columbia University, com- 
posed of some forty scholars and men of affairs, who are in the very 
front rank in the fields of Economics, Social Science, History, and 

Public Law, have united in a carefully prepared statement of what 
they conceive to be the relation between the interallied war debts 
and the reparations fixed by the Treaty of Versailles, and the peace 
and economic restoration of the world. There can be no higher or 
more disinterested authority than that which these gentlemen en- 
joy. They are not closet philosophers, but men in active touch with 
every phase of practical life, including finance, industry, commerce, 
and legislation. 

The American people hardly realize the enormous advance made 
toward the establishment of international security and peace during 
the year 1926. The word Locarno has become symbolic not only 
‘of progress but of an ideal which is no longer considered impracti- 
cable. This is due in chief measure to the fact that M. Briand, Dr. 
‘Stresemann and Sir Austen Chamberlain are not merely the heads 
of the foreign offices of three governments whose interests have often 
been in competition or in conflict, but that these men have become 
close comrades, working with loyalty and devotion upon a common 
task. It is unthinkable that the people of the United States, with 
their traditions and their historic policies of international friendship 
‘and cooperation, will withhold any possible measure of support 
from this epoch-marking movement. 

_ This statement is in no sense a proposal for the cancellation of 
the debts or reparaticns. It isan argument for the re-study of these 
debts and reparations and of all the problems that are so closely 
telated to them or that grow out of them in the light of most recent 
political and economic developments in Europe, this re-study to 


7 [7] 


180 


be made by or under the direction of an international conference 
summoned for that particular purpose. 

To Americans it will be of special interest to read again the letter 
addressed by Thomas Jefferson when Secretary of State to Mr. 
Hammond, Minister Plenipotentiary of Great Britain, under date 
of May 29, 1792, and still more, perhaps, the preliminary draft of 
that letter which was submitted to the criticism of President Wash- 
ington, of Alexander Hamilton, of James Madison, and of Edmund 
Randolph, in answer to the claims made by the British Government 
arising out of the destruction, here in the United States during the 
War of Independence, of property belonging to the British Govern- 
ment or to Loyalists. 


TEXT OF STATEMENT 


We the undersigned members of the Faculty of Political Science 
and Associated Schools of Columbia University submit for im- 
partial consideration the following statement. 

In our judgment the war debts settlements are unsound in prin- 
ciple. Certainly they have created and are fostering a deep sense 
of grievance against us. Wedo not urge that the debts be completely 
cancelled. Whether there should be cancellation in whole or only 
in part depends on many complicated factors yet to be studied. 
What we do urge is complete reconsideration in the light of presen 
knowledge. To this end we believe that an International Con 
ference should be called to review the entire problem of debt pay 
ments, and make proposals for readjustment. This need not an 
should not in any way interfere with present negotiations, no 
the current operation of the Dawes plan. On the contrary it woul 
facilitate them. The proposed conference cannot be hurriedly im 
provised, but definite steps looking toward its organization woul 
ease the present situation and we should find ourselves cooperatin 
helpfully and constructively with other nations upon terms of 
lasting settlement. 


A Turning Point in History 


In the last few months the nations of Western and Central Eu 
rope have made an unprecedented effort to rid themselves of th 
menace of future war. At present they are succeeding beyond al 


[8] 


181 


expectation. In proportion to their success the whole world will 
share in the benefits. If their great adventure fails, the whole world, 
including ourselves, will some day suffer incalculably. 

The prime condition of the success of any such movement is 
mutual trust and understanding. Our war debt settlements have 
produced distrust and misunderstanding. When century-old polit- 
ical enmities are yielding to common sense, an international financial 
problem of recent origin, whatever its magnitude, should not be 
allowed to threaten the foremost gain in international relations 
since European nations began. 

Our share in the war debt problem arose out of our entry into the 
war in 1917. True we should have had no occasion for war had there 
been no European war. But the controversy as to the responsibili- 
ties of European Powers for the outbreak of war in 1914 is not perti- 
nent to that other question of why we went to warin 1917. America 
went into the war onan issue ofitsown. The casus belli for the United 
States was unrestrained submarine warfare, behind which lay—in 
1917—an apprehension of decisive military and naval successes on 
the part of the Central Powers imperilling the development of free 
institutions. 

Our declaration of war was followed by the mobilization not only 
of our man power but also of our material and financial resources. 
From the latter we made extensive advances to other nations fight- 
ing a common enemy. Thus arose the first phase of the war debt 

‘problem. It was at a time when we were straining every effort to 
hasten our own direct participation in the war. From the record of 
debates in Congress, it is clear that these advances were not re- 
garded by those who voted them as business transactions, but rather 
‘as joint contributions to a common cause. But even if we did not 
have these statements, the grants themselves would have been justi- 
fiable upon no other ground. That the borrowers used the credits 
to help win their own wars is undoubtedly true; but the reason that 
we loaned them the money was the fact that by so doing they were 
also helping us to win our war. If this were not so, it would mean 
that our Government diverted for the use of others vast sums of 
money and essential war supplies at a time when it was calling upon 
) the country to make every possible sacrifice to maintain its own 
cause. The credits were freely given because they were to secure for 
us effective support for our own effort, either directly on the field 


[9] 


182 


of battle or indirectly by strengthening the nations associated with 
us. They would have been justified by no other purpose. 

Not all of our war loans were used directly for military purposes. 
Some of them helped to feed and clothe civilian populations. Some 
provided permanent improvements useful after the war was over. 
Some of the loans were made after the armistice was concluded. 

In the debt settlements we have made, insufficient account has 
been taken of those differences. The origin of various items in the 
debts was ignored. In justice and in reason they should have been 
considered. 


The Debt Settlements 


The United States early abandoned the attempt to collect the full 
amount called for by the original debt contracts. The first formal 
step toward establishing a new basis of debt calculation was the 
creation of the Funding Commission by the Act of Congress of 
February 9, 1922. According to this Act, the Allies were to pay all 
debts in full but the rates of interest were reduced to 4% per cent. 
The very first debt negotiations, those with Great Britain, showed 
that still further reduction was necessary, and ‘‘capacity to pay”’ 
became the basis of these subsequent negotiations. This was the 
formula used in the reparations section of the Versailles Treaty with 
reference to Germany. At best a vague and difficult formula, it 
has nevertheless, upon the whole, been applied in a very real effort 
to reach satisfactory settlements. The Secretary of the Treasury 
has stated that the cash values cancelled in the settlements with | 
Great Britain, Italy, Belgium, and in that offered France, amount 
to $5,489,000,000. This means that the United States is now can- | 
celling about one-half the aggregate sum represented by the principal 
and interest of the original debts. 

This partial cancellation would be generous to the extreme if the | 
debts had been mere business transactions. It is nevertheless re- 
garded by the debtor nations as not touching the heart of the issue. 
They hold in mind chiefly those credits which were used to wage war. 
They contend that they should not in fairness be required to repay 
advances that were expended for our benefit as well as for their own | 
at a time when money was our only contribution. For over a year | 
after our declaration of war their troops almost alone held the enemy 
in check. This was the critical period during which Germany, freed | 


[10] 


183 


on the East, brought the whole weight of its power to break the West- 
ern front. During this supreme crisis, if the allies had spared lives 
or if we had stinted supplies, our war as well as theirs might have 
been lost. 

No attempt to reopen these pages of history was made in the nego- 
tiation of debt settlements. This was chiefly because the Act creating 
our Debt Funding Commission allowed only limited discretion to 
that body. Moreover, there is no way to compare the value of 
supplies with that of lives sacrificed in war. 

The points ignored in the official settlements, however, have been 
all the more accentuated in popular discussion. The controversy 
has ranged far beyond the question of money. The question of 
generosity between debtor and creditor has been discussed upon 
terms of what equivalent, moral or material, has been rendered for 
the sums advanced. To the minds of our debtors this is the core 
of the controversy. Sooner or later we shall be compelled to give 
consideration to this point of view. 

But before addressing ourselves to the more vital aspects of the 
controversy we must call attention to serious defects in the existing 
settlements. 


The Existing Settlements 


{ 


The existing settlements rest upon a basis which is itself open to 
question. The formula “capacity to pay,’’ which, in the case of 
ordinary debt adjustments, may be applied, to the possible benefit 
of both parties, proves difficult if not impossible of just application 
in the case of debts so vast as to reach over two or three generations. 
In most of the debt settlements the period agreed upon stretches 
forward sixty-two years. The estimates of capacity are, of necessity, 
based upon the statistics of the pre-war period and those of the ab- 
normal post-war or reconstruction period. Obviously there are no 
figures for the future. 

_ How impossible it is to estimate the relative economic ‘‘capaci- 
ties” of nations for so long a period will be clear to anyone who looks 
back over the last sixty-two years. The steel industry of Germany, 
\now far surpassing that of England, is almost entirely the product 
of the last half century. Similarly, other basic industries such as 
coal, wheat, cotton, rubber, potash, and even gold are in process of 
redistribution among the countries of the world. Nations today are 


a A 


t 


184 


changing their relative positions even more rapidly than in the past. 
How, then, can there be any degree of certainty in the estimates a 
future capacity, upon which this settlement so largely rests? It is 
surely unjust to fix the burdens of future generations on the basis 
of guesswork. 

This injustice is all the more evident when one compares 
various settlements and notes the wide discrepancies in liberality. 
On a 434 per cent interest basis France is to pay only 50 per cent, 
Belgium 54 per cent, of the whole debt (interest included). Grea’ 
Britain is to pay 82 per cent while Italy pays only 26 percent. What 
ever justification there may have been for differences in treatment 
of the various national debts, it is unfortunate that the princip 
“capacity to pay” should result in such striking variations as these. 

Still more regrettable is the impression which the formula conveys 
concerning our attitude as creditor. To exact a payment according 
to the capacity of the debtors seems to imply that the exaction is 
according to the fuji capacity to pay. If this basis of settlement had 
been rigorously applied, it would mean that we were threatening 
lower materially the standard of living in Europe by taking tribu 
of their every possible saving for three generations to come. 
is without doubt a wrong interpretation of the attitude of the cred 
tor; but it isa natural, popular interpretation in the debtor countries 
The phrase itself, “capacity to pay,” rings hard and heartless 

As a matter of fact, it was partly to escape just this kind of iz 
ternational misunderstanding that negotiators dealt primarily with}, 
the interest instead of with the principal. The attention of 
creditor could be drawn to the full amount of the principal, that of 
the debtors to the scaled-down interest or lessened annual payments 
Uniortunately debtors and creditor looked at just the opposite ite 
The result is that dissatisfaction over the terms of the settlement 
has extended to a misunderstanding of motives. In the case o 
nations bound so closely and for so long to carry out agreements 
which seem to them unjust, this dissatisfaction may easily wreck the 
plans for world order and peace, according to which Europe is 
building its shattered economic fabric. Our debt settlements are pz 
and parcel of a whole network of settlements between the other Pow 
ers. It is clear that the whole matter should be re-examined on 2 
basis not of immediate expediency but of justice and of generous in 
tention that would give no reasonable ground for misunderstanding. 


[12] 


185 
Some Economic Effects of the Present Agreements 


Before proceeding with the proposal for a revision of the debt 
policy let us see what are the economic effects of the present agree- 
ments. The political and moral issues are, as we have seen, of the 
greatest importance. But it will come as a surprise to many to find 
that the material interests involved, so far as we are concerned, are 
relatively small. 

(1) Our scheduled annual receipts from debt payments during 
the next four years will be less than five per cent of either the present 
annual commodity imports or the present annual commodity ex- 
ports of the United States. This percentage is smaller than the 
year-to-year fluctuations which have actually occurred in either 
exports or imports since the War. 

(2) The scheduled annual payments for the next few years will 
constitute, it is estimated, less than one-third of one per cent of 
our annual national income. Even the increased payments called 
for in later years will not exceed one-half of one per cent of the prob- 
able national income. 

(3) The scheduled annual debt payments will make much less 
difference in the American tax bill than is generally supposed. The 
_ payments due in the next four years amount to less than two dollars 
annually for each person in this country. They amount to less 
than 10 per cent of the estimated yield of the Federal Income Tax 
of 1927; and if applied entirely to a reduction in the personal income 

tax rate, they would make a difference of only two dollars a year to 
a typical income tax payer with net income of $5,000 a year. The 
latest tabulation shows that in 1924, 90 per cent of the Federal 
income tax payers paid on net incomes of less than $5,000. 
(4) Fulfilment of the debt agreements necessarily imposes on 
| European debtors hardships much greater than the benefits that 
accrue to America. Great Britain, France, Italy, and other European 
countries are already bearing burdens which strain their courage 
and strength. Taxation, in proportion to income and population, 
is between two and three times heavier in England, France, and 
Italy than it is in the United States. Payments that could at best 
mean a paltry gain for most American taxpayers mean to the over- 
taxed debtors a crushing load. 


[13] 


186 


A New Basis Possible 

We must substitute for the unfair and inappropriate principle 
of capacity to pay a full and frank reconsideration of the debt and 
reparation problems, in an international conference to which all 
the countries concerned shall send representatives. To this con- 
ference the representatives of the United States should go, not with 
rigid instructions, like those hampering our Debt Commission, but’ 
with directions to determine what settlement, compatible with the 
demands of justice, would seem best calculated to promote the 
future peace and prosperity of the world. This is a joint enterprise. 
It calls for similar action by other nations and affects all interna- 
tional monetary operations directly caused by the War. 

We realize that this statement has touched upon only a few of the 
many aspects of this complex question. We have said nothing about 
the legality of our claim to full payment. That is conceded by all 
of the debtor nations. We have passed over the fact that while the 
advances. were made by the United States Government the means 
required were secured by issues of bonds to our own citizens, which” 
bonds must be paid with interest whether or not the debtor na- 
tions make repayment. But to the extent that these advances were 
used by our associates to prosecute the war to our incalculable 
advantage, they seem to us like other war expenses, financed through 
bond issues rather than through revenues from taxation. We have 
said nothing of the special reason for moderation in our claims for 
repayment from Great Britain growing out of the loans she was 
making to our continental associates, also mainly to permit a more 
vigorous prosecution of the war, not of her declared willingness to} 
forego repayment from them in exact proportion to the extent that} 
we relax our demand for repayment from herself. This aspect must 
be given due weight in any international debt conference. Finally 
we have not attempted to estimate the gains made by our associates, 
territorial and other, through the peace treaty. Their losses wer 
incomparably greater than ours. They have come out of the war 
crippled and impoverished. No sober-minded economist would think 
of claiming that their gains would offset more than a fraction o} 
their losses, or that, should we cancel all the debts due us, their 
economic position would be raised to anything approaching our 

There is one aspect of the question, however, that must not be 
ignored. Can any thoughtful American view with indifference thi 


[14] 


187 


growing odium with which his country is coming to be regarded by 
our European associates? This would be distressing whatever 
the occasion; but when from the European point of view, there is 
convincing justification for their unfavorable estimate of us, should 
we not welcome a chance to talk out our differences around a con- 
ference table? Evidence is accumulating week by week that our 
insistence on debt payment will cause the hatreds, which European 
countries are finding means to allay among themselves, to be con- 
centrated squarely against us. Already international trusts are 
being organized to compete with our industries in neutral markets. 
Already it is being pointed out that the reparation payments which 
threaten to hold Germany in financial bondage for two or three 
generations are necessary to permit the Allies to pay their war 
debts to us. A coalition of Europe against the United States might 
prove a good thing for Europe. Can anyone believe that it would 
be a good thing for the United States? Thus the demands of justice 
_ are reenforced by the dictates of political expediency and the counsels 
of economic self-interest in urging us to meet halfway the countries 
of Europe in the International Debt and Reparations Conference, 
which we here propose. 

John Bates Clark, Edwin R. A. Seligman, Henry R. Seager, 
Vladimir G. Simkhovitch, Wesley C. Mitchell, John Maurice 
Clark, James W. Angell, James C. Egbert, Robert Murray 
Haig, Roy B. Kester, Roswell C. McCrea, Robert H. Mont- 
gomery, J. Russell Smith, Thurman W. Van Metre, H. 
Parker Willis, James C. Bonbright, Frederick C. Mills, Wil- 
liam E. Weld, Rexford G. Tugwell, and Emilie J. Hutchinson, 
professors of economics, finance, and business. 

Howard Lee McBain, Lindsay Rogers, Joseph P. Chamberlain, 
Hessel E. Yntema, Parker Thomas Moon, Raymond Moley, 
and Philip C. Jessup, professors of public law. 

William R. Shepherd, James T. Shotwell, Carlton J. H. Hayes, 
Robert L. Schuyler, David S. Muzzey, Dixon Ryan Fox, 
Austin P. Evans, Evarts B. Greene, J. Montgomery Gam- 
brill, Edward M. Earle, Harry J. Carman, and Maude A. 
Huttman, professors of history. 

Franklin H. Giddings, Samuel McCune Lindsay, Alvan A. 
Tenney, Robert E. Chaddock, William F. Ogburn, and 
Herbert N. Shenton, professors of social science. 


[15] 


188 


THE INTERALLIED DEBTS AND AMERICAN POLICY 


BY JAMES W. ANGELL, PH.D. 


Associate Professor of Economics in Columbia University 


The years immediately after 1918 were an unhappy period in the 
world’s history. The war, instead of settling everything, seemed to 
have settled little or nothing; and the great Peace at first appeared 
to be not a peace at all, but only a thin cloak for ever new and ever 
more bitter intrigue, strife and distrust. After four years of titanic 
combat and suffering, Europe was desperately eager for rest, for time 
to repair its wounds, and for the establishment of general under- 
standing and tolerance. Instead, it was plunged into an era worse, 
in some ways, than the war itself. The new nations sought enemies, 
not friends; the old nations, believing in nothing and suspicious of 
everything, kindled afresh the fires of their historic hatreds. Govern- 
ments tottered and fell; currencies collapsed; anarchy spread swiftly 
through the economic as well as the political order; and financial 
ruin stared entire nations in the face. 

But with the close of 1923, the situation definitely changed, and 
the world is now well launched on a course unprecedented in history. 
International trust and honest cooperation have at last begun to 
take the place of international fear and combat. The worst of the 
monetary catastrophes have been faced and overcome, and the 
restoration of currency stability has poured new life into Europe’s 
shattered economic structure. An era of genuine peace and progress 
and prosperity, political and economic and moral, lies just ahead. 

Of the many events that have contributed to this new situation, 
four are especially important. They have all taken place within 
the past three years. One is the bringing into operation of the 
Dawes plan, in 1924. The Dawes plan has put German currency 
and finance back on its feet, has put a term to the protracted Repara- 
tions struggle, and has even done much to dissipate the traditional 
Franco-German bitterness. A second is the restoration of the gold 
standard in England, in 1925; an event of profound significance 
not only for England’s economic life, but for the international trade 


[16] 


189 


and finance of the whole world. A third is the Locarno conferences 
‘and the resulting agreements, which have bound up most of Western 
Europe in a marvellous network of mutual guarantee and mutual 
_ protection. So far as human efforts can, these treaties, which supple- 
| ment the obligations of the League of Nations, make war between 
_the signatories an absolute impossibility. Fourth, and last, there 
| is the settlement of the largest part of the inter-governmental debts 
left by the war and its aftermath. With the exception of the obliga- 
tions due from Russia, which are probably not recoverable, some 
sort of funding agreement has been made for every large debt now 
outstanding. Over ninety-seven per cent of the debts due the Ameri- 
can government, for example, have now been tentatively or definitely 
settled. 
_ Of this great series of developments during the past two or three 
years, all save perhaps the last are clear and indisputable steps for- 
ward. They mark the restoration of political and economic stability 
throughout most of Western Europe, the substitution of order for 
anarchy; and they offer a definite promise for further high achieve- 
ment in the near future. This cannot be said unequivocally, how- 
ever, with respect to the debt settlements. It is true that the settle- 
ments have replaced uncertainty on the general status of the debts 
by certainty, and this is in itself an extremely important gain. But 
they are still one of the great remaining sore spots in Europe, and 
perhaps one of the great danger spots. Especially with respect 
to the debts due the American government, the settlements and 
the bitter feeling they have engendered are running directly counter 
to the remarkable new trend in European thought and action: 
that is, the trend toward understanding and cooperation, toward 
mutual trust and mutual concession. 

Up to the present time the great majority of the American people 
has taken little part or interest in the debt settlements. But the 
actions of our government have now created a situation which makes 
it imperative for the entire nation to scrutinize with new care the 
origin of the debts, and to weigh with utmost seriousness the wisdom 
and justice of the course upon which we have officially embarked. 
It is the purpose here to set out certain fundamental features in 
the situation, ignorance of which makes impossible an adequate 
understanding of the problem as a whole or any reasoned judgment 
upon its merits. : 


ey gel 


190 
I 


Consider, first, the origin and growth of the inter-governmental 
obligations themselves. 

The great bulk of the interallied debts had their origin in the war- 
time requirements of the European Allies for manufactures and for 
raw materials, that were needed either directly in the war itself or 
for the support of the civilian populations. The Continental Allies 
called such high percentages of their people to arms that the remain- 
ing civilian population could not produce adequate quantities of 
munitions for the troops. They had to secure the balance from 
England, and after April, 1917, from the United States. Similarly 
all of them, even including England, were compelled to turn to the 
United States for certain foodstuffs and essential raw materials. To 
pay for these purchases huge supplies of sterling and of dollars were 
required, supplies far in excess of anything procurable in the foreign 
exchange markets. The only way of securing them in sufficient 
volume was the floating of loans in England and in the United 
States. As a practical matter, this meant primarily borrowing 
between governments.1 In that situation—in the pressing emergency 
of war—lies the origin of over ninety per cent of the original inter- 
governmental debts. The remainder is accounted for chiefly by 
loans for relief and reconstruction made after the Armistice. 

By the end of 1918, shortly after the cessation of hostilities, the 
nominal gross total of the inter-governmental debts had reached the 
huge sum of twenty-one and a half billion dollars.2_ Every country 
involved, except the United States, was a debtor; but because of the 
interchange of operations and accounts, many were also creditors. 
England and the United States, however, were the only nations with 
a net surplus of credits. The positions at the close of 1918 were 
these. The United States was owed seven billion dollars, by seven 
different countries. England was owed, net, two and a half billions, 
not including the debts from her Dominions. France was in debt 
one billion net, Italy three billions, and Russia three and a half 
billions. The other countries owed smaller and relatively unimpor- 
tant amounts. 

1About 114 billions was raised by the direct sale of foreign government obligations in 
the open investment markets here, up to April, 1917. About $2 billions was secured, up to 
1919, by the return of American securities held abroad. (National Industrial Conference 
Board, The Inter-Ally Debts, pp. 43, 44.) 

* The net debts, the sum of the net debits (or the sum of the net credits) resulting after 
each country’s total nominal credits had been offset as far as possible against its nominal 


debits, were of course much smaller. The met total at the time of the Armistice was a little 
over $9 billions, 
[18 ] 


_ 191 


By 1920, the nominal total had risen to nearly twenty-five billions. 
| The United States alone was owed nine and a half billions, now due 
| from eleven countries. 

In 1923, when the first important negotiations for a settlement of 
the debts began, the nominal gross total was about twenty-eight 
billion dollars. The United States was owed roughly eleven billions. 
England’s gross credit was of nearly equal size, but her debts reduced 
| her nef credit to three and three quarters billions. France was in 
debt to the extent of three and a half billions wet; Italy four and a 
third billions; and Russia four and a half billions. The Russian debt, 
incidentally, is probably not recoverable. The chief Russian credi- 
tors are England, three billions; France, one billion, and the United 
States, a quarter billion. 

Thus in the five years after the Armistice the nominal gross total 
| of the debts had risen from twenty-one and a half billion dollars to 
twenty-eight billions. That is, the debts had increased by nearly a 
| third after hostilities ceased.‘ There were three reasons for this 
increase. First, and most important, military outlays did not stop 
dead with the signing of the Armistice. It was necessary to keep 
| troops under arms, to feed and clothe them, for many months after 
| November 11, 1918. This fact is usually entirely ignored. The end 
| of the war between the United States and Germany, for example, 
was officially proclaimed only as of July 2, 1921—two years and a 
| half after the Armistice. Second, innumerable loans were negotiated 
|for reconstruction and relief,—a new kind of obligation. Finally, 
‘the compounding of unpaid interest charges was of course very heavy. 

So much for the origin and size of the obligations between the 
i Allied governments. There remain the Reparations charges on 
Germany, about which little can be said here. If the scheduled 
| Reparations and prior Treaty payments are capitalized at four 
and a quarter per cent over sixty-two years, their “present” or 
| cash” value is about twelve and three quarters billions of dollars. 
| The addition of this item raises the nominal gross principal sum of 
the world’s present inter-governmental obligations to the enormous 
| figure of forty billion dollars.* 
 3The net total, ag see the preceding footnote, was much smaller: about $16 billions. 
4The net totals, as see the two preceding footnotes, increased in a much larger propor- 
tion, by nearly 80%. This was due to the fact that the post-Armistice loans were made 


| almost entirely to countries which were not at the same time lenders themselves. 
| ©The net total is about $21 billions. 


Cro] 


192 


II 


Bearing these characteristics of the inter-governmental debt 
situation in mind, we come now to the position of the United States, 
the largest single creditor. 

The sum due the United States at the time of the Ar.nistice, to re- 
peat, was seven billion dollars. By the end of 1924, additional 
advances for military purposes, reconstruction and relief loans, and 
the accumulation of unpaid interest had raised the nominal total tc 
about twelve billions. Of this sum less than nine hundred millions 
were for relief and reconstruction advances,—that is, less than eight 
per cent. At the present time funding agreements have been made 
and ratified with twelve of the seventeen debtor countries, while 
that with France—the Mellon-Bérenger agreement—is still pending 
The remaining unfunded debts, due from Armenia, Austria, Greece 
and Russia, amount to only two hundred and forty-four million 
dollars of original principal, or two and four tenths per cent of the 
total.§ 

What has been our policy in funding these debts? What have we 
done, and why, and how is our action likely to affect our international 
future? 

The loans granted to the Allies for military purposes were made 
under authority of certain clauses in the various Liberty and Victory 
Loan Acts. The language of these Acts was quite unmistakable. 
They provided that the obligations purchased by our government 
from foreign governments should bear the same rate of interest, and 
be made under the same general terms, as the corresponding obliga- 
tions of the United States issued to provide the necessary funds. I! 
this provision were carried out, the debts now due us would bear from 
four to five per cent interest, and would be amortized over the next 
ten to thirty years. Similarly the War Debt Funding Act of 1922 
stressed the repayment in full of the principal of the debts. It 
authorized a reduction of the interest charges to four and a quarter! 
per cent, and an extension of the period of payment to twenty-five 
years; but in most other respects it paralleled the stipulations of the 
Liberty Loan Acts, except for a passing reference to justice. 

But when the time came for making actual funding agreements. 
in 1923 and subsequent years, the War Debt Funding Commissior 


6The Austrian debt has been extended 20 years by agreement. In Armenia there is nc 
government, while the Russian government has not yet been recognized. The Greek debt 
is in controversy. 
[ 20 ] 


193 


proceeded on a different and more moderate basis. It has admittedly 
secured the repayment of the principal of all the loans, if the princi- 
pal be regarded simply as a number of dollars. But it has reduced 
the interest charges in all cases, and has spread out the payments on 
account of principal over sixty-two years. This action has produced 
terms very unlike the terms of the national debt of the United States 
as it now exists, and has resulted in lowering the “ present” or “‘cash” 
value of the scheduled payments to a figure far below the original 
principal sum. Despite the somewhat confusing statements of the 
Treasury, the principal of the debts therefore has in effect been re- 
duced very materially. Just how much, we shall see in a moment. 

The principle set forth in the Liberty Loan Acts, in other words, 
has been abandoned. The new principle developed by the Debt 
Commission, the basis on which it has acted, is that of “capacity 
to pay.” The idea underlying the use of this principle is ethically 
sound, and entirely comprehensible. The Debt Commission found 
that the debtors were in severe financial straits; and that to demand 
payment in full, on the same basis as that of the obligations issued 
by the American government itself, would undoubtedly bring some 
of them close to bankruptcy. Proceeding in an entirely justifiable 
manner, the Commission therefore undertook to scale the debts and 
payments down to a level more in accordance with the supposed 
capacity of the debtors to pay. The motive, within its limits, was 
reasonable and even generous, but the particular method adopted 
to give this motive effect is perhaps open to question. Let us post- 
pone any criticism of the principle of “capacity to pay” for a mo- 
ment, however, and look at the results it has yielded. As examples 
of four different types of settlement, take the agreements made 
with England, France, Italy and Belgium. They are the four lead- 
ing debtors, and owe ninety-six per cent of the eleven and a half 
billion dollars of funded obligations due to our government.’ 

(1) Great Britain. The agreement with Great Britain was signed 
June 19, 1923. The principal sum of the debt as funded is four 


billion six hundred million dollars. The debt bears interest at three 
| per cent through 1932, and thereafter at three and a half per cent. 


The payments run over sixty-two years, terminating in 1984. The 


| total volume of the payments to be made in this period is a little 
- over eleven billion dollars. At an interest rate of four and a quarter 


7Figures on totals from Monthly Review of the Federal Reserve Bank of New York, 


_ June, 1926, p. 4; taken in turn from figures furnished by the U. S. Treasury. 


[21] 


194 


per cent—what' the United States is paying on the bulk of its own 
borrowings—the present cash value of the payments is three billions 
seven hundred and ninety-two millions. Contrasted with a funded 
nominal principal of four billions six hundred millions, this means 
that the effective principal sum of the debt has been reduced by 
eighteen per cent. 

This is the general type of settlement used in the numerical major- 
ity of the agreements, 

(2) Belgium. The agreement with Belgium was signed August 
18, 1925. The principal of the debt as funded is four hundred and 
eighteen million dollars. The pre-Armistice portion of the debt, 
thirty-six per cent of the total, bears no interest, and is to be repaid 
over sixty-two years. The post-Armistice portion bears a small 
but increasing rate of interest to 1935, and thereafter three and 
a half per cent. These payments also run sixty-two years, and 
cease in 1987. The present cash value of the two sets of payments 
combined is two hundred and twenty-six million dollars. The effec- 
tive reduction in the principal of the debt is therefore forty-six per 
cent. 

(3) Jtaly. The Italian agreement was signed November 15, 
1925. The principal of the debt as funded is two billion forty-two 
million dollars. No interest is charged for the first five years. In- 
terest then begins, in 1930, at one eighth of one per cent, and rises 
gradually to two per cent in 1980. The payments run for sixty-two 
years, and cease in 1987. Their present value is five hundred and 
thirty-eight million dollars, and the effective reduction in the prin- 
cipal of the debt is seventy-four per cent. 

(4) France. The Mellon-Bérenger agreement with France, not 
yet ratified, was signed April 29, 1926. The principal of the debt 
as funded is four billion twenty-five million dollars. No interest is 
charged for the first five years. Interest then begins, in 1930, at 
one per cent, and rises gradually to three and a half per cent in and 
after 1966. The payments run for sixty-two years, and cease in 
1987. The present cash value of the payments is two billion eight 
million dollars, and the effective reduction in the principal of the 
debt is fifty per cent. 

8 The “ present’’ value of a given sum receivable at a given future date is that sum which 
when compounded at (here) 414% for the indicated number of years, will equal the sum 


receivable at the future date. The calculation of ‘‘ present” values, made with an annuity 
table, has to be done separately for each payment. 


[22 ] 


195 


Thus the four biggest debts due to our government have been 
settled, actually or tentatively, in four entirely different ways, and 
with entirely dissimilar results. If we now include the nine other 
settlements made during the past three years,® the results of the 
thirteen settlements taken together are as follows. 

Including the unratified agreement with France, the total princi- 
pal of the debts as funded is eleven and a half billion dollars; and the 
total of the payments we are to receive over the next sixty years, 
taking interest and amortization together, is roughly twenty-two 
billion dollars. Eleven and a half billions is substantially equal to 
the principal of the debts as originally contracted, plus accumulated 
interest! to the date of settlement. But it is only the nominal 
principal. The interest payments are so cut down, and the period 
of repayment is so lengthened, that the effective or real principal, 
calculated on a business basis, is very much smaller than this nominal 
principal. We are paying four and a quarter per cent on the bulk 
of our own national debt, with provision for its retirement over the 
next thirty years. On the basis of an interest rate of four and a 
quarter per cent, with retirements running over sixty-two years, the 
“present”’ or ‘‘cash’’ value of the scheduled debt payments to our 
government is not eleven and a half billions at all, but a little under 
seven billions. That is, the effective or real principal is only sixty 
per cent of the nominal funded principal. The average reduction 
has therefore amounted to forty per cent. Roughly speaking, our 
government is paying four and a quarter per cent on the bulk of 
the money it borrowed, while it is receiving only two and fifty-five 
one hundredths per cent on the money it loaned to foreign countries. 
It is therefore quite wrong to say that we have been ungenerous to 
our debtors. Relative to the original legal status of the debts, and 
disregarding the broader moral questions involved, we have shown 
a very pronounced degree of generosity. 

But the reductions are extraordinarily uneven. Although the 
reduction on the debts as a whole amounts to forty per cent, in re- 
spect to particular countries it ranges all the way from seventy-four 
per cent in the case of Italy to only eighteen per cent in the case of 
Great Britain. These extreme differences are justified by the Debt 

*Finland, 1923; Hungary, 1924; Lithuania, 1924; Poland, 1924; Latvia, 1925; Czecho- 
Slovakia, 1925; Esthonia, 1925; Rumania, 1925; Jugo-Slavia, 1926. All are under $200 


millions apiece. Their total is $438 millions. 
10 Charged variously at 344% to4¥Q%. 


[23] 


196 


Funding Commission on the basis of asserted differences in the 
capacity to pay of the various debtor countries. But without wishing 
to impugn in any way the efforts or the purposes of the Debt Com- 
mission, we cannot help regarding it as at least curious that the 
application of the principle of capacity to pay should have produced 
such widely divergent results. This divergence is the more difficult 
to understand when we recall that Great Britain, which receives 
the smallest reduction of all,—only eighteen per cent,—borrowed 
from us only in order to re-lend the proceeds to the Continental 
Allies.11 It is hard to refrain from concluding that the so-called prin- 
ciple of ‘“‘capacity to pay’’ was, within considerable limits, little 
more than a cloak for polite and perhaps half-conscious bargaining 
of a familiar order. 

By way of contrast to the action of the United States on the debt 
settlement question, it is interesting to look at the position of Eng- 
land, the other net creditor in the inter-governmental account. The 
three big debts due to England are those owed by Russia, France 
and Italy. The Russian debt, of three billion dollars, is probably 
not recoverable, and must be written off the books. In the case of 
France and Italy, settlements were made during the first part of 
1926. The nominal total of the French debt is a little under three 
billion dollars, but the ‘‘present’”’ value of the payments now sched- 
uled is only about forty-five per cent of that sum. The nominal total 
of the Italian debt is about two billion seven hundred million dollars, 
but the present value of the scheduled payments is only about 
twenty per cent of thatsum. Great Britain has thus made reductions, 
on the two big recoverable debts due her, of fifty-five and eighty 
per cent respectively. The average reduction is sixty-seven per cent; 
whereas the average reduction granted by the United States is only 
forty per cent. Moreover, England is substantially pledged by the 
Balfour note not to seek from her debtors of all classes, whether on 
interallied account or from Reparations, more than will suffice 
to pay off her sole creditor—the United States. In a word, England 
cannot gain from the debt situation, and will probably lose. 


III 


Such, then, has been the debt settlement policy of the American 
government: namely, a policy of reduction in accordance with the 


11 So Lord Balfour in the ‘‘ Balfour note,’’ August 1, 1922. (Bankers Trust Company, 
The Inter-Ally Debts, p. 195.) 
[24] 


197 


estimated capacity of the debtors to make payment. Under the 
resulting more or less complicated agreements, we are scheduled to 
receive a varying but growing volume of payments from foreign 
governments throughout the next sixty years. How large are 
these payments, and how important are they to us? 

The total funded principal of the debts is eleven and a half billion 
dollars. On this principal we are to receive, in the course of the 
next sixty years, payments totalling twenty-two billion dollars, 
with a present value of seven billions. But the receipts are not 
distributed evenly from year to year. They are small at first, then 
rise sharply for a time, and only reach a maximum in 1983. During 
1927, the total scheduled receipts will be only two hundred and 
ten million dollars, and they remain under two hundred and twenty 
millions a year through 1930. Then they rise sharply through the 
following decade, and reach three hundred and fifty millions a year 
in 1940. After that the rise is very gradual; and the maximum annual 
receipt, of four hundred and twenty-two millions, is not reached until 
1983,— over half a century distant. Then the payments drop rapidly, 
and cease entirely in 1987. 

How important will these receipts be to us? It is of course im- 
possible to predict the distant future, but a few figures will indicate 
the relative significance of the payments that are scheduled for the 
next four or five years. 

Until 1931, to repeat, the annual payments will remain under 
two hundred and twenty million dollars. Consider first the relation 
of this sum to our foreign trade, which will of course be directly 
affected by the payments: in largest part, we can receive them only 
in the form of an increase in commodity imports, or as a decrease 
in exports, or as some combination of the two. Two hundred and 
twenty million dollars is, roughly, only five per cent of our present 
volume of commodity imports, and only four and a half per cent of 
our present volume of commodity exports.% It is smaller than 
the annual changes which the ordinary fluctuations of foreign trade 
produce under normal conditions, and also smaller than the fluctua- 
tions of the trade balance between any two years since the war. 
It is less, even, than the recent annual fluctuations in merely our four 
principal imports, taken together, or in our three principal exports. 


li, e., in 1925, the latest full year available at the time of writing. 
Imports: sugar, raw silk, coffee, crude rubber. Exports: raw cotton, refined oil, 
‘Wheat and flour. 
[25] 


: 
| 
| 


198 


Second, the relation of the payments due in the next four years 
to American taxation.14 These payments will make much less 
difference in the American tax bill than is generally supposed. They 
amount to less than two dollars annually for every man, woman and 
child in the country. They amount to less than ten per cent of the 
estimated yield of the federal income tax in 1927; and even if they 
were applied entirely to a reduction in the personal income tax 
rate, they would make a difference of only two dollars a year to a 
typical income tax payer with an annual income of five thousand 
dollars. The latest tabulations show that in 1924, ninety per cent 
of the federal income tax payers paid on net incomes of Jess than 
five thousand dollars. 

Finally, it is estimated that the payments for the next few years 
will constitute less than one-third of one per cent of our annual 
national income. 

These comparisons apply, of course, only to the immediate future; 
and it is true that the debt receipts will rise by nearly sixty per cent 
in the next fifteen years. But the other elements in our general 
national economy, except taxation, will also presumably grow; 
and will thus diminish the eventual increase in importance of the 
debt receipts. Even if our national income, for example, remained 
at only its present size until 1940, the large payments scheduled in 
that year would still be less than one half of one per cent of our 
income. 

The general conclusion which these comparisons clearly suggest 
is that the debt payments are not going to play a tremendously 
significant part one way or the other in our national economic life. 
Relative to the volume of our domestic production, they are little 
more than a drop in the bucket. Relative to foreign trade their im- 
portance is small, and even relative to public finance—itself but a 
fraction of the whole—their importance is not great. 

But if the debt payments are of comparatively minor importance 
to us, the creditor, quite the opposite is true of the debtor countries. 
Quantitative comparisions are difficult to make intelligently in this 
field, but nevertheless two or three may be ventured. First, the 
“‘real’’ burden of taxation of all sorts is between two and three times 
heavier in the principal debtor countries than it is in the United 

14 These calculations were made by Prof. R. M. Haig, of Columbia University. 


18 Taken as $75 billions to $80 billions for 1926. Estimate by Dr. W. I. King, of the 
National Bureau of Economic Research. 


[26 ] 


199 


States. In England, the estimated ratio of taxation to aggregate 
national income in the year 1925-1926 was twenty-four per cent, in 
Italy twenty-five, and in France nearly thirty. In the United States 
it was only eleven per cent.1® Second, the burden of the central- 
government debt, in the debtor countries, is from seven to eleven 
times heavier relative to national income than it is here. Finally, 
per capita income itself is much greater in the United States. With 
us, the estimated per capita income in 1924-1925 was six hundred 
and twenty-fivedollars a year; in England three hundred and eighty- 
seven dollars, in France one hundred and eighty-three dollars, and in 
Italy only seventy-one dollars. The contrast needs no elaboration. 
It is a familiar observation that a dollar is ‘‘worth”’ far more to a 
poor man than toa rich man. On this basis, and in the light of the 
comparisons just made, a fairly definite conclusion can be drawn, 
with some show of reason. It is simply this, that the debt payments 
will impose hardships and burdens on our debtors out of all propor- 
tion to the benefits which we shall receive. We cannot remain in- 
different to these hardships. Both a sense of fair play to our former 
Allies, and the compelling dictates of national self-interest, required 
that we consider the present position of the debt question with the 
greatest seriousness. The letters of Mr. Peabody last summer, sug- 
gestions made by others of the highest reputation, such as Professor 
Taussig of Harvard University, and the more recent manifesto of the 
Columbia University Faculty of Political Science, all show that the 
issue is by no means closed in the minds of the American people. 


IV 


We have now reviewed most of the important facts that bear on the 
| history of the debts due the American government. From this survey 
it is entirely clear, I think, that the debt settlements are far from 
' satisfactory in character. In the first place, they have given rise 
| to intense bitterness and dislike on the part of the debtors. This 
result is in itself suspicious. Nothing in the past history of the 
| debtor countries indicates that they have ever been unwilling to 

recognize and pay their honest obligations. The fact that they have 
unanimously protested against the full payment of our claims should 
itself make us question very seriously the fundamental justice of those 
claims. In the second place, the settlements are going to produce a 

16 Estimates by Prof. E. R. A. Seligman, of Columbia University. 


27a 


200 


distribution of the war burdens so unequal, so grotesquely unreason- 
able, that we cannot accept the situation with an easy conscience. 
The day of our passive indifference to the rest of the world is gone 
forever. 

The debt settlement policy of the American government is open to 
question, and perhaps to outright criticism, in two main respects. 
One turns on the origin of the great bulk of the debts themselves. 
The other turns on the unequal and discriminatory character of the 
successive settlements. Let us look at these two questions again 
for a moment. 

With respect to the Jegal origin of the debts, no problem exists. 
Their legal status has never been questioned. They are definite and 
unequivocal obligations, voluntarily undertaken by the debtor gov- 
ernments. But their moral origin, their status in the eyes of funda- 
mental justice, is quite another matter. Hardly twenty per cent of 
the original debts can properly be regarded as in any sense commer- 
cial in character, even including all reconstruction and relief opera- 
tions under the heading ‘‘commercial.”” The remainder, the great 
bulk of the loans, were made in the vital emergency of war, to meet 
the life-or-death needs of our Allies. They were made to carry on a 
supreme military enterprise, in which we were one of the partners. 
At the time they were contracted there seems to have been little 
distinction, in the minds of Congress or of the nation at large, be- 
tween lending the money to the Allies and giving it outright. The 
essential thing was to get the money raised, and to get the supplies 
it could purchase shipped across the ocean,—where those supplies 
could help bring to a successful close our own enterprise, the defeat 
of the Central Powers. Is it any wonder, therefore, that the European 
Allies have watched with bitter incomprehension our government’s 
apparent disregard of all these considerations, and have met with 
bitter protests its efforts to enforce the repayment of those sums, 
which are technically described as loans? We might demand, with 
almost equal reason, that we be paid for the lives of the American 
soldiers who were killed in battle. Moreover, what is almost an 
ironic paradox, all but a very small fraction of the proceeds of the 
loans were spent in this country, for American goods and American 
labor. They were not spent abroad, in foreign factories and on 
foreign farms. That fact does not improve our position in the eyes 
of the world. 


[ 28 ] 


201 


The other fundamental criticism of the debt settlements rests on 
their unequal and discriminatory character. The extent of the 
differences has already been pointed out. To Italy we have granted 
an effective reduction in the debt of seventy-four per cent, to France 
fifty per cent. To war-flooded Belgium we granted only forty-six 
per cent, and to Great Britain a bare eighteen per cent. These 
extreme divergences have been justified on the basis of asserted 
differences in the capacity to pay of the debtors. But, without in 
the least impugning the honesty of purpose of our Debt Commission, 
the extraordinary size of the divergences must inevitably give rise 
to grave doubts as to the soundness of the methods which have pro- 
duced them. Second, the meaning of the term ‘capacity to pay”’ is 
itself ambiguous. We can perhaps speak, with at least limited as- 
surance, of a nation’s capacity to pay in the present or in the imme- 
diate future; but with respect to a term as long as sixty-two years, 
neither the idea nor the results its application has produced can have 
an intelligible significance. Think back. over the phenomenal eco- 
nomic and political changes which the world has witnessed in the past 
half century, and you willsee how dubious must be theattempt to 
predict capacity to pay over the coming half century, how inequita- 
ble its results. Within considerable limits, the use of the principle 
can be little more than a disguised form of bargaining, not a scientific 
method for determining a just course of action. Third, referring the 
‘settlements to the debtors’ supposed capacity to pay implies an 
analogy to the bankruptcy proceedings of private law. This analogy 
is entirely erroneous. As we have already seen, the great majority 
of the debts are not on the same moral footing as the debts of com- 
‘merce, and cannot be treated justly on that footing. 

Finally, although this is perhaps not so fundamental a criticism, to 
carry out the settlements as they now stand will impose burdens and 
hardships on the debtors which are out of all proportion to any bene- 
) fit which we may expect to receive ourselves. Indeed, it is not at 
all clear that on balance we shall benefit at all from the payments. 
\Our Treasury will benefit, of course, and our taxation will be light- 
ened a little. But we shall have to receive the payments primarily 
in the form of commodities, either as an increase in our imports, or 
as a decrease in our exports, or both. In each event, certain Ameri- 
can industries and enterprises that are related directly or indirectly 
to foreign trade will be hit, and may be hit hard. Their suffering 


[29 ] 


202 


may well exceed any gain from that small, widely diffused reduction 
in the American tax bill, which the receipt of the debt payments will 
make possible. 

In summary, then, our debt settlement policy has brought us 
lamentable harvest of thorns. We have lost prestige abroad, we may 
well have secured for sixty-two years the cumulating dislike and 
suspicion of our former allies, and we have aggravated immensely 
that international ill-feeling, which Locarno has been doing so much 
to terminate forever. In view of all this, it is not unreasonable to 
suggest that before long a reconsideration of the whole debt question 
will be forced upon us. It will be forced upon us by our own con- 
sciences, by ourselves as citizens of the world. If grave injustice 
is being done, if we are the source of that injustice, we cannot re- 
main tranquil in our present isolation and indifference. When world 
events have developed a little farther, it will almost surely become 
necessary to pool once more the debt problems of the entire world, 
perhaps including Reparations, and to recast the present agreements 
along new lines. 

Speaking with all the diffidence of a private citizen, I should like 
to see the following steps taken: First, arbitration to separate the 
commercial from the non-commercial portion of Europe’s debts to 
us. Second, cancellation of the non-commercial or military debt 
to us, on condition that the other creditors in the Inter-Allied account 
take similar steps with respect to the debts owed to them. Third, 
a reconsideration of the distribution and perhaps the totals of the 
Reparations charges on Germany, in the light of those shifts in the 
financial position of the Allies which cancellation of the political 
debts would produce. I have in mind here, especially, the peculiar 
position of Great Britain. 

Such measures as these will relieve the world’s trade and finance 
of their present severe burdens; and they will promote interna- 
tional peace and friendship, political as well as economic and financial. 
But the time is not ripe for action now, and perhaps will not be for 
two or three years. Europe itself is not yet sufficiently stable in all 
respects; and the American Congress, with whom lies the ultimate 
power of determination, is still far from ready for any such step. 
But there is hope for the future, and good ground for believing tha 
the counsels of fundamental justice will prevail. 


[30 ] 


203 


THE INTERALLIED DEBTS 


BY F. W. TAUSSIG 
Henry Lee Professor of Economics, Harvard University 


I 


The sums involved in the settlements with our former allies are 
very great. The total owed to the United States comes in round 
numbers to ten billions of dollars—ten thousand millions. Almost 
the whole of this sum is due for advances made during the war and 
for the conduct of the war. Something is owed for American supplies 
left over in Europe after the war and sold there, and something 
more for relief extended after the war. Over nine-tenths, however, 
represents war expenditure, and it is this nine billions alone to which 
I shall give attention. The three chief debtors are Great Britain with 
four billions, France with three and one-third billions, Italy with one 
and two-thirds billions. I state the sums in round numbers, as I 
shall throughout this paper. 

Agreements on the terms of repayment have been made with all 
the debtors, big and little. With the exception of France, each of 
them has come to a definitive settlement with the United States; 
and a settlement with France will doubtless come ere long. In every 

case the agreement is for annual payments spread over a*period of 
sixty-two years—the period beginning with the year 1922 for Great 
Britain, with 1925 for Belgium, 1926 for Italy, and so on, according 
_ to the dates when the several agreements were reached. The annual 
| payments are moderate, in some cases even small, for the first five 
| years, and then rise to a figure which is maintained practically to 
| the end. Great Britain is the only country that pays heavy sums at 
the start—roughly 160 millions a year for the first ten years, there- 
after about 180 millions. Italy’s payment begins with only five mil- 
lions, rises to twenty-three millions by 1936, and finally attains a 
maximum of fifty millionsa year. Belgium’s begins with five millions 
and in ten years becomes about thirteen millions. The proposed 
arrangement with France calls for thirty millions annually during 
the earlier years (beginning with 1926?) and for a maximum of 125 


fig 2 


204 


millions by 1943; some such figures, it is probable, will be found in 
the eventual settlement. Taking all the countries concerned, and 
including the sums proposed for France, we find that the total re- 
mittances to the United States on debt account will be, in round 
numbers, 210 millions a year during the first five-year period, and 
250 millions for the second quinquennium; then about 350 millions 
for forty-five years thereafter; and finally something more than 400 
millions for the last decade of the long-drawn-out process. The end 
is to be reached in 1984 for Great Britain, and in the years im- 
mediately following for the other countries. 

I remarked at the outset that the sums involved are huge—totalling 
no less than nine billions. But this total stands only for the book 
amount of the loans as made by us during the two short years of the 
war period. What it stands for in other terms than book account— 
what was really handed over by us to our allies when the loans were 
made and recorded—will be indicated presently. While it behooves 
us to understand and remember just how things then took their 
course, this aspect of the case does not bear on the point to which 
I would at present direct the reader’s attention. What is now to 
be noted is the obvious contrast between the huge lump sum and the 
comparatively small annual payments, and the perhaps less obvious 
fact that this series of moderate annual payments is the one real 
thing coming back to the United States. 

The annual payments alone have concrete importance. True, an 
actuary can calculate how much they represent, from his point of 
view, as an equivalent capital sum. According as he figures on a 
3 per cent interest basis, or on one of 3% per cent or 4 per cent, he 
will tell you that so many billions—more or less as the assumed 
percentage rate is lower or higher—may be reckoned as the ‘‘present_ 
value’’ of what is coming back; and he will tell you, too, how much 
may be regarded as repayment of principal, how much as interest on ~ 
deferred payments. But such figuring has no significance for the 
realities of the case. It may serve to allay hostility or criticism and 
make a good “talking point” before Congressional committees and _ 
chambers of commerce. But it is hardly more than a pretty mathe- 
matical game—attractive to the mathematically-minded, impressive - 
and puzzling to those not so minded. What is really to happen, what 
signifies for us and for the other peoples, is the series of annual 
payments 


[ 32 ] | 
i 


205 


What, now, about the amount of those annual payments and their 
importance to us? 

Consider them in their proportion to other items, to other related 
things. Two, three, four hundred millions make impressive sums. 
But what do they signify in comparison, for example, with the total 
income of the people of the United States? Our total national in- 
come for 1925 is supposed to amount to 90,000 millions. This is a 
stupendous sum. I will not vouch for its precise accuracy. The 
total of our income may be something more, something less. My 
statistical friends believe the figure to be within Io per cent of the 
truth; and for the present purpose that degree of accuracy is all that 
is needed. Compare with this total the 200 millions odd which 
we are to receive from the Europeans in the next year or two. They 
come to about one quarter of one per cent of our national income. 
It is as if, having one hundred dollars to receive, we were to get 
twenty-five cents in addition—a negligible supplement. No doubt 
the payments are to increase, and in a few years will be doubled. 
But our national income will also increase; and, at anything like the 
rate of advance we have had in the last five years, that too will be 
doubled in ten years orso. As elements in our total annual resources, 
the payments will always be trivial. On the other hand, they will 
be no small items for the repaying countries, their national incomes 
being so much below ours in money values—only half as much per 
head for the more prosperous of them, hardly one quarter as much 
for the less prosperous. And this discrepancy will become greater as 
time goes on. The growing remittances will become more and 
more onerous for them, since their national incomes, even though 
they may not stand still, cannot grow at the phenomenal rate which 
is ours and seems likely to remain ours. 

Look at it in another way. These sums will go into the Federal 
treasury, and will be entered in the Government’s budget. They 
may be directed either to lowering taxes or to reducing our national 
debt. The revenue of the Federal Government now amounts, in 
round numbers, to four billionsa year. The debt receipt amounts for 
the present to 200 millions, more or less—say 5 per cent of the gov- 
ernment revenue, possibly 6. It happens that for the last fiscal year 
the Government came out, quite unexpectedly, with a surplus 
substantially larger—some 300 millions; and we are at odds with 
each other about its disposition. Nor does it matter much what we 


[33 ] 


206 


do with it. As regards reduction of our national debt, we are re- 
peating the course of events which followed the Civil War of 1861— 
65. Then, as now, we began to pay off a great debt with speed and 
with ease; and now, as then, we are in a fair way to get rid of it in 
a decade or two. This unexampled procedure—no other country 
has ever handled a public debt in this way—is due in but small degree, 
for either period, to surpassing financial leadership. It is the result 
of the growth of this industrial giant of ours; of an abounding and 
increasing prosperity, which gives us in many a way occasion to 
pause, to reflect, to consider what we shall do with our abundance of 
material things. 

Consider, finally, what the repayments amount to in their possible 
effects on our foreign trade. What kind of effect they will have I 
shall presently indicate; here my question is, how great an effect? 
It happens that our imports—it is these which will be primarily 
afiected—at present amount to about the same sum as our Federal 
revenue—roughly four billions a year. The debt repayments will 
again be 5 or 6 per cent of this sum total. Now the imports fluctuate 
from year to year by many hundreds of millions—by much more 
than 5 percenta year. These fluctuations trouble us notatall. The 
business world hardly knows that they take place, and the public 
at large knows not and cares not, nor has it any reason for knowing 
or caring. 

To sum up, the impressiveness of the figures when stated in 
suppositious capital sums is misleading. What actually comes to us 
—namely, the annual payment—is little as compared with the 
national income, with the Federal Government revenue, with the 
country’s foreign trade. If we get these receipts we shall not be 
made rich. If we do not get them we shall not be ruined. 


II 


So much as to the magnitude and proportions of the facts of the 
case. I turn now to their meaning for us. Two questions arise. 
So far as all this payment goes, be it great or small, is it to our ad- 
vantage or is it not? The second question is different: not whether 
the payment is to our advantage, but whether it is right that we 
should receive it. There is an economic question, and behind that 
there is a question of justice. I say justice. Perhaps it would be 


[34] 


ain 


7 


207 


better to say chivalry, or even long-run expediency—at all events 
something other than the bare matter of measurable gain or loss. 

As regards the immediate economic aspects of the case, the under- 
lying fact is that payment must come to us in goods. Of course the 
debt settlements are in terms of dollars, and we have to reckon in 
dollars. But it is the merest commonplace in economics that pay- 
ment cannot come in cash, or that but the merest fraction can so 
come. If it did come to us in cash—that is, in gold—we should be 
embarrassed to know what to do with the money. Our Federal bank- 
ing system already has more gold in its reserve than it knows how 
to use with advantage. But, to repeat, it is through goods, not 
in money, that we must expect the remittances to be made. Our im- 
ports will become larger or will be made larger than they otherwise 
would have been. The increase will not be great relatively to the 
total volume of our foreign trade, as was just explained. But some- 
what larger the imports will be. More goods will come in from a- 
broad, and this is the way in which we shall really be paid. 

No doubt the inflow of the additional imports of goods will be 
staved off for a time by loans, such as we have been making to for- 
eigners in these post-war years. We used to be borrowers from Eu- 
rope; now we are lenders to all the world. Like so many other 
things, our international credit position is being turned topsy-turvy. 
These lending operations of ours are not likely to cease, though they 
may not continue indefinitely at the pace of recent years. They 
bring possibilities of postponements of the rise in imports, of tem- 
porary overlappings and adjustments, by which our foreign trade 
for the next few years will be affected in ways not easy of prediction. 
These minutie are interesting and sometimes perplexing to the 
economist and the financier, but do not affect the outstanding fact: 
it is in goods that we must take payment. 

The goods, however, will not necessarily come in from the coun- 
tries which have to make the payments. They will probably come 
by indirect ways from other countries. English people will not sell 
us many English goods direct. They will send their goods to other 
countries—the Orient, South America, Australia. We shall then 
buy goods in those countries, and shall be able to pay for their goods 
by utilizing the debt remittances to our Government. This sort of 
indirect trade is going on all the time. Our imports now consist 
chiefly of raw materials and tropical commodities, most of which 


[35] 


208 


come in free of duty. It is imports of this very class that are likely 
to be swelled in consequence of the debt payments. We shall get 
more tea, coffee, raw silk, wool, jute, rubber, and the like. 

No doubt the whole of the additional imports ascribable to the 
debt payments will not be accounted for in this way. Some share 
will come to us in the form of manufactured goods sent directly 
from England, France, and Germany. Certain lines of American 
industry will experience additional competition from their European 
rivals. Consequences of this sort, even though less in quantitative 
importance than is commonly supposed, must be faced as a probable 
result of the debt payments. So far as this direct inflow of goods 
from Europe takes place, it raises the question whether added com- 
petition from abroad is on the whole a good thing for a country or 
a bad thing. The answer to that question depends upon one’s entire 
attitude with regard to foreign trade and the maintenance of a 
system of very high protection—a much larger topic than I can go 
into on this occasion. I will merely remark that in my judgment the 
consequences do not all run one way. In the main they will not be 
harmful to us, in some part they will be. But in any event they will 
not be of great moment. 

I may remark, in passing, that the free traders and tariff reformers 
are disposed to exaggerate the importance of this particular matter 
for the problems which interest them. They urge that, since pay- 
ment must be made in goods, we must make it possible to receive 
the goods; whereas, by imposing tariff barriers, we make it impos- 
sible to receive them. A necessary corollary of the debt payments, 
in their view, is a lowering of our customs duties. Not quite so, 
for the reason just adduced. True, our high duties do make it some- 
what harder to send in the goods directly from the remitting coun- 
tries, and in so far impede the process of payment. I am entirely in 
sympathy with the movement for cutting down our high protective 
duties; and am willing to admit, too, that there is an obvious and 
indeed amusing inconsistency in our policies. We cannot insist on 
the debt payments and at the same time keep out European manu- 
facturers from our own markets and also boost our own exports of 
similar manufacturers to their outlying markets. But it is all a 
question of more or less, and rather less than more. Some special 
kinds of goods have always been coming in from European countries. 
Probably more of these quasi-specialties will be sent us. The main 


[ 36 J 


209 


inflow will be of the so-called non-competitive articles—tropical 
products, raw materials, and the like. The staunch protectionists 
can hold to their policy, if they will, and yet not be seriously troubled 
by the consequences of the debt payments. 

There is, however, another aspect of the process of payment in 
goods which must make us pause. We have to remember that from 
this point of view there is a contrast with the past—a resemblance 
in one way, but a disquieting contrast in another. When we made 
the loans to the Allies in 1917-19, we handed over to them not cash, 
but goods. This is the resemblance: our loans were made in goods, 
just as the repayments are to be made in goods. But now the con- 
trast. We charged high prices for the goods that we sent out in 
1917-19. ‘‘Charged”’: this is a misleading term. No one deliber- 
ately charged high. But the plain fact is that the circumstances of 
those years were such that the goods which the Allies got from us 
—the only things they received—were debited to them at very high 
rates. While we put vast dollar funds at their disposal, they got 
few goods per dollar. Now the price situation is quite otherwise; 
and it will be otherwise, so far as we can foresee, for many years to 
come. Prices have gone down to two-thirds of what they were when 
the loans were made. Our debtors, to make up the same dollar 
values, must send us 50 per cent more of goods than they received 
—one half as much again. We are profiting as a people by the re- 
vulsion in prices since the great upheaval; not deliberately or in- 
tentionally, but profiting we are. 


III 


So much about the bare economic aspects, on which I feel qualified 
to speak with some assurance. I turn now to the other aspect of 
the problem, on which my qualifications cannot be those of the 
specialist. What can be said of the equities of the case? 

First note that we—that is, the constituted authorities—have 
modified our position within the last few years. 

When Congress in 1922 passed the first act for regulating the 
debt payments, it was provided that the commission then established 
for arranging the settlements should accept nothing but payment in 
full. The principle on which Congress legislated was that a debt is 
a debt, and that a debt should be paid. The letter of the contract 


fieg a 


210 


should prevail. And this principle was virtually followed in the 
settlement with Great Britain. Virtually; it was not followed with- 
out some slight qualification. The total payments made by Great 
Britain can be figured out to be something less than the face value of 
the debt owed to us by Great Britain. But the deficiency is slight. 
To all intents and purposes it may be said that Great Britain met 
us on our own ground. Since the United States took the view that 
this was a plain and simple debt, Great Britain, in a period of acute 
depression in her industries, of painful recovery from enormous 
losses, of sad uncertainty about the future, conformed to the letter 
of the law as laid down by the United States. No complaint, no 
arguing; if you will have it so, let it be so. 

When it comes to the other countries, however, our procedure has 
been different. With Belgium, Italy, France, not to mention the 
smaller countries, we have dealt in quite another spirit. With them 
we have regarded what is called their capacity to pay. Ordinarily, 
when one deals with a debtor and proceeds on the basis of the letter 
of the law, one does not regard his capacity to pay. Or it is regarded 
only if he is bankrupt and the creditor is in the position of simply 
taking what is left of his assets. We have not acted in this way 
with Belgium, Italy, France. We acceded to a compromise—even 
proposed it. With all these countries the compromise means, what- 
ever be the actuarial method of computation, that we are accepting 
very much less than the amount of our loans. Congress has ratified 
the compromises (all except that with France, still to be ratified by 
France herself). Thereby it would seem that Congress has come to 
a state of mind not the same as that which prevailed when the orig- 
inal debt settlement act of 1922 was passed. 

This acceptance of something other than the letter of the law would 
seem to carry with it an admission that, after all, the principles of 
settlement are not easy to define. Shall we treat these obligations as 
plain ordinary debts, to be collected in the same way and in the 
same spirit as debts between man and man, and have no regard for 
past community of spirit, for good relations in the future, for things 
other than the bare face of the contract? Weare often told that it is 
healthy for people to pay their debts; nay, it is to their own advan- 
tage, if they wish to keep their credit good and perhaps borrow again 
another time. So it is, no doubt, in the ordinary transactions of 
trade. It is so, too, as regards those international loans which are 


[38 ] 


2I1 


extended by individuals (banking houses and their customers) to 
foreign governments. Otherwise the fountains of business credit 
would be dried up. But were our loans to the Allies of this character? 
Were we moved by any such considerations as apply to ordinary 
loans? And were the Allies, on their part? Let us not forget the 
past, the very recent past. Surely we made these loans not as in- 
vestors, in the way of a bargaining contract, but as peoples to peoples 
for mutual aid. We thought it our duty, and our interest also, to 
stand with the Allies in the dreadful struggle. For the first year of 
our participation the only effective thing we could do was to put 
at their disposal our supplies of goods. The form of loan was chosen 
because it was the easiest and quickest way to get the thing done. 
Doubtless in the rush and pressure of the crisis no deliberate choice 
was made. It was all a matter of getting things done. And so it was 
with the Allies. Loans if you will; anything that brings instant help. 
Consider the loans for a moment, as it has been urged they should 
be considered, from the point of view of the debtor’s own ultimate 
interest. Let him repay for his own good, we are told; if he repays 
_ now he will be able to borrow another time. Quite true as regards 
_ ordinary business operations. But in the stress and ferment of war 
is any such reflection or reckoning ever made by either party? Does 
anyone suppose that, if another such conflict should come (God for- 
bid!) and if we were again compelled to align ourselves, we should 
hesitate to do anything and everything that might help the cause 
we deemed right; that we should debate whether to lend or not lend, 
_ to give or not give, to go ahead or to dicker, because once upon a 
_ time, in the forgotten past, another loan had been made, also in agreat 
war, and had not been treated either by us or by our associates as a 
| business contract? It is in no such spirit as this that individuals or 
peoples deal with each other when war comes on. 
Reasoning and cold-blooded calculation, however, help little on the 
| aspect of the case we are now considering—the equities. We get 
scant aid from any analysis of the bases of contractual obligations, 
from historical precedent, from economic lessons. The matter 
reaches into higher realms. However we deceive ourselves by focus- 
ing attention on the measurable gain or loss, whether for ourselves 
orfor ourallies, we cannot but be movedat bottom by conscience—by 
sentiment if you please. My own conscience is not easy. My sense 
of self-respect as an American is not happy. I find myself admiring 


[39 ] 


212 


the attitude of Great Britain and not entirely admiring our own 
attitude. For many, many dreadful months we were unable to aid 
our allies with anything except money and loans. We did this cheer- 
fully. Surely we then had no thought of being engaged in purely 
commercial transactions. We gloried in being a rich and powerful 
country, and thereby in a position to aid our almost exhausted allies 
and friends. Has that spirit entirely disappeared? 

Let it not be forgotten that Great Britain also made great loans to 
her allies—our allies; and that she is dealing with her debtors in quite 
a different way from ours. She lent almost identically as much to 
France as we did—something over three billions of dollars. She 
lent much more to Italy than we did: three billions, as against half 
as much by ourselves. She has come to settlements with them 
similar in plan to ours (payments spread over a long series of years). 
But there is a marked difference in degree, and a difference even 
more marked in spirit. She too is willing to accept annual install- 
ments; but the sums are very much less than those we call for. They 
are not half so much from France, barely a quarter as much from 
Italy. And—what is more on my conscience—she agrees to reduce 
these payments exactly in the proportion in which her own payments 
to us may be reduced. If we cut down, she will also cut down to the 
same extent. Early in the post-war negotiations she announced that 
she would proceed on this basis; and thus she is still ready to proceed. 

One’s attitude on the whole question is necessarily influenced by 
one’s hopes or fears, confidence or despair, about the post-war situa- 
tion. Did we really do well to enter on the war? Are we quite 
disillusioned about the consequences? Does the future still seem as 
dark and uncertain as it did three or four yearsago? He who believes 
it was all in vain, that the world was bad and still is as bad as before, 
will acquiesce in turning our backs on the old allies. He will be 
disposed to deal with them at arm’s length, collect what can be col- 
lected, disregard their plight, disregard, too, any feelings they may 
have about us. But he who believes that good is stirring, and that 
the world may be starting on better ways; that something is due from 
us toimprove on the bad past—he will ask himself how this problem 
can be dealt with so as to promote the good that stirs and foster be- 
tween nations a spirit of mutual help. 

I have no proposal to submit. The time is not ripe for conferences, 
negotiations, revisions. We in the United States have not rid our- 


[40 ] 


213 


selves of the lamentable partisan divisions and entanglements which 
followed the war. At the present juncture, too, political and eco- 
nomic conditions in theagricultural regions of the Mid-West arenot 
conducive to a re-reckoning. Things will run their present course 
for a while, and the debt remittances will continue to come to us. 
None the less we may pause and reflect, give time for the internal 
dissensions of the moment to die out, bethink ourselves soberly what 
we may wish to do in the end. 

Sooner or later we shall have occasion to reconsider. The time 
may come shortly. The factor in the case which is most likely to 
lead to reconsideration is the progress of the German reparations 
payments. These payments, under the Dawes Plan, are rapidly ap- 
proaching their maximum. By 1929 they will reach the highest sum 
which Germany is called upon to produce—namely, the sum of 625 
million dollars a year. Without entering into any detailed discussion 
of the reparations programme, or of the difficulties which it may 
encounter, we must face the possibility—nay, the probability—that 
when the German obligations thus reach a head, and when the actual 
transfer of the large sums to the Allies needs to be contrived year 
after year, a new stage will be entered on. A revision of the whole 
international situation will then be on the cards. Hazardous though 
it is to make prediction, I believe that before many years—perhaps 
within a few—some arrangement for a single great lump-sum pay- 
ment by Germany will be brought forward. The whole of this series 
of long-drawn-out international remittances, stretching over half a 
century and more, between ourselves and the Allies, between the 
Allies, and between Germany and the Allies, will then present itself 
in a new light. 

For our part, are we resolved to insist unrelentingly on what the 
settlements now prescribe for the long period of sixty-two years? 
The war soon will cease to mean anything for our daily doings. The 
material sacrifices to which it led have been almost forgotten; within 
a decade or so the last remembrance of them, in the way of taxes 
and budget burdens, will have disappeared. To the younger genera- 
tion it is already a matter of the dim past. 

Can we think it probable that these long-strung payments will 
continue to have any meaning to the peoples involved, other than 
that they are a burden to one side and a dubious benefit to the 
other? Later generations will regard the question of fitness and jus- 


[41] 


214 


tice from their own point of view. Will our people then believe the 
debt payments to be just? We are rich, and we are rapidly getting 
richer. Prosperous beyond anything hitherto imagined in the his- 
tory of mankind, we now are preparing to receive, through half a 
century and more, payments from peoples much less prosperous. 
These annual streams of goods, legacies of a great historic disaster, 
will then be related to no services of ours, to no discernible obliga- 
tions of theirs. They may be reminders of a high past, but may 
also be evidence of an unworthy present. 

If the rest of the world wishes to sweep away the wreckage of the 
past, clear the decks, and start fresh and unencumbered, shall we 
remain aloof? I can feel no elevation of spirit, no pride in the position 
we are now taking. When the day for a new alignment comes, how 
shall America take her stand? 


[42 ] 


215 


THE ECONOMIC VALUE OF THE MANDATED 
TERRITORIES IN RELATION TO INTERALLIED DEBTS 


BY EDWARD MEAD EARLE, PH.D. 


Associate Professor of History, Columbia University 


There has been much loose talk concerning the value to the Allies 
of the former German colonies and of certain Ottoman territories 
allotted to the victors as mandates under the League of Nations. 
During the ‘‘ Khaki Election” of 1918 in England supporters of a 
punitive peace openly boasted that the costs of the war would be 
defrayed by stripping Germany of her overseas possessions and by 
dismembering the Turkish empire. Optimistic politicians and 
publicists indicated that Mesopotamia alone would repair much of 
the economic waste of the Great War to the British Empire. More 
recently, in the United States, it has been maintained that the 
colonial acquisitions of the Allied Powers under the terms of the 
Peace of Paris have been such as to deprive them of any claim to 
considerate treatment by the United States in the matter of the 
interallied debt settlements. The United States, it is argued, hay- 
ing possessed no territorial ambitions during the war and having 
received no territorial compensations from the peace might logically 
enough expect full compensation from those who divided among 
themselves the spoils of war.1 Advocates of a revision of the debt 
settlements, however, point out that the United States considered 
territorial acquisitions as in every sense a liability rather than an 
asset. Had the United States desired at Paris any share in the 
former German or Ottoman Empires, it doubtless could have had 
such a share for the asking; on the contrary, we rejected participa- 
tion in the mandatory system by refusing to assume the responsi- 
bilities inherent in standing sponsor for the infant Armenian Re- 
public. It cannot be denied, of course, that the several Allied Powers 
had, or imagined that they had, important interests—economic and 
otherwise—in the territories separated by the Peace of Paris from 
Germany and Turkey. An analysis of their experiences in the 


1¥For a typical statement in support of this contention see Frederick Bausman, Facing 
Europe (New York, 1926), Chapter II, ‘‘What Our Partners Seized.” 


[43 ] 


216 


mandated territories, however, will demonstrate that the path of 
the victors has not been strewn with roses. The balance sheets 
indicate heavy liabilities, and the assets are not what they were 
anticipated to be in the enthusiasm of post-armistice days. Well 
might the signatories of the Columbia debt manifesto reaffirm their 
contention that ‘‘no sober-minded economist would think of claim- 
ing that the gains of the Allies would offset more than a fraction of 
their losses, or that should we cancel ail the debts due us their eco- 
nomic position would be raised to anything approaching ours.’’? 

There are certain imponderables in evaluating the worth of the 
mandated territories. For example, there is the question of the ac- 
quisition of regions of great strategic importance. Clearly, the de- 
fence of the Suez Canal has been simplified for the British Empire 
by the possession of the Palestinian mandate. British control of 
Iraq removes the alleged menace, of long standing, that some power 
would seek to establish military bases in the Persian Gulf and thus 
menace communication with India. The Pacific Islands possess 
advantages as regards naval control and cable communications in the 
Far East. It would obviously be difficult, if not impossible, how- 
ever, to place a dollar value upon these assets of a strategic character. 
It must be kept in mind as well that each of these territories, while 
in itself of military or naval advantage to the Allies, constitutes 
nevertheless an exposed position in turn to be defended. And it may 
well prove to be the fact that the cost of defence will outweight any 
commercial advantages to be derived from the mandate. Indeed, 
in certain cases it already has been demonstrated that the mainte- 
nance of troops will for some time be a serious drain upon the manda- 
tory power. In Syria the military cost to date has mounted into 
billions of francs and has mortgaged any pecuniary advantage to 
France for years to come. 

The economic value of the mandated territories to the Allies may 
be analyzed from the following points of view: commercial, revealed 
by an examination of trade statistics; financial, portrayed by an 
analysis of the budgets of the mandates and of the grants-in-aid by 
the mandatory powers; potential, measured by a forecast of the 
value of the several territories as producers of raw materials, markets 
for manufactured goods, and opportunities for the investment of 
surplus capital. 

2See pages 7-15 for full text of this statement. 


[44 ] 


217 


As to the commercial value of the mandated territories to the 
Allies, it might be advisable, first, to consider the pre-war trade of 
the former German colonies, now constituting the Class B and Class 
C mandates under the League of Nations. In 1912 the total foreign 
trade of the German colonies was valued at 263,400,000 marks, of 
which considerably less than half, 107,400,000 marks, was with 
Germany.? By taking over the German territories in Africa and in 
the Pacific, the Allies at best could only hope to displace this German 
trade with trade of their own nationals; assuming no striking ex- 
pansion in the commerce with these regions, the additions to the 
import and export trade oi the Allies would be in the neighborhood 
of twenty millions of dollars a year. The profits on this interchange 
of commodities would be an insignificant contribution to the costs 
of the war, even if they had not been offset by the expenses of civil 
and military administration. The statistics for the mandated terri- 
tories in Africa indicate no material increase in foreign trade since 
the war; likewise they reveal the interesting fact that the former 
German trade has not been altogether eliminated—in Tanganyika, 
for example, more than ten per cent of all imports in 1925 came from 
Germany.‘ In addition to losses of trade which were suffered by 
the Germans as a result of the loss of their colonies, there was a sum 
of over five hundred million marks invested by German firms in the 
African and Pacific territories (1913) which was liquidated by the 
Allied Powers. This is a sizable sum, which unquestionably should 
be taken into account in any reexamination of comparative gains 
and losses as a result of the war. 
It may be asked whether the post-war trade with the B and C man- 
dates, however unimportant in amount, may not be of vital impor- 
tance because of the raw materials supplied from these territories to 
‘the Allied Powers. For example, the Island of Nauru, under mandate 
4 the British Empire, exported in 1923 more than 270,000 tons of 
phosphates. About half of this total went to Australia, about ten 
‘per cent to New Zealand, and about five per cent to the United 
‘Kingdom. But Tunis, Algeria, and the United States continue to 

3The figures concerning pre-war German colonial trade are taken principally from the 
Deutsches Kolonial-Handbuch for 1913 and 1914 and from the Statistisches Jahrbuch fur das 
Deutsche Reich for the same years. Dr. Mary E. Townsend, of Columbia University, a 
Specialist in German colonial history and in the African mandates, has been of great service 
fe oa sam she preparation of this article in so far = it deals with the former German colonies 


4See the reports of the British and French governments to the League of Nations con- 
cerning the administration of the African mandates during the years 1924 and 1925. 


[45 ] 


218 


be the principal sources of the British nitrates supply, whereas 
almost two-fifths of the phosphates supply of Nauru goes to countries 
outside the British Empire. The mandated territory of Tanganyika 
exported to Great Britain in 1923 some thirteen thousand tons of 
hemp, which was less than one-quarter of the amount imported by 
Great Britain from the Philippine Islands in the same year. Cotton 
is a commodity of which the Germans sedulously promoted the 
production in Africa before the war; yet in 1925 all the African colo- 
nies of the Great Powers (including the mandates, but excluding 
Egypt) produced only about a quarter of a million bales, as com- 
pared with 900,000 bales produced in South America and about 
sixteen million bales in the United States. The following table shows 
some of the principal raw materials and foodstuffs imported into the 
United Kingdom from the mandated territories, together with the 
total of such commodities imported for the year 19235: 


Commodity Exported from Total Imported Into 
British Mandates United Kingdom 
Grains II,000 tons 5,000,000 tons 
Cocoa 6,000 tons 60,000 tons 
Coffee 4,000 tons 20,000 tons 
Raw cotton 1,600 tons 436,000 tons 
Ground nuts 16,000 tons 96,000 tons 
Palm kernels 700 tons 260,000 tons 
Copra 7,000 tons 86,000 tons 


When one turns from the former German colonies to the Near 
Eastern, or Class A, mandates, one finds no striking differences from 
the situation described above. In Syria, of a total import trade of 
almost eight hundred million [paper] francs in 1924 less than fifteen 
per cent was of French origin; France furnished less than 113 million 
francs worth of goods, compared with almost 140 millions for Great 
Britain, almost eighty millions each for Turkey and Italy, and about 
seventy millions each for Egypt and the United States. The export 
trade of Syria amounted in 1924 to 340 million francs; of this France 
received only 52 million francs, or about fifteen per cent, whereas 
Turkey, Palestine, Egypt, and Transjordan, neighbors of Syria, 
absorbed the great bulk of the trade. Silk is the only important 

5Compiled from various British official sources, particularly from reports on the ad- 


ministration of the mandates, Statistical Abstract for British Overseas Dominions and Pro= 
tectorales, 1909-1923, and publications of the Department of Overseas Trade. 


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219 


raw material which France obtains from Syria. The export trade 
of Palestine is largely composed of melons, oranges, nuts, and soap, 
of which Egypt and Syria receive the vast majority; the British share 
is about one-third of thetotal. Only about one-seventh of Palestinian 
imports originate in the United Kingdom; of the total of seven and 
a third million pounds (Egyptian) Germany furnishes 12.5 per cent, 
Syria 14.5 per cent, the United States about ten per cent’. Great 
Britain controls a larger portion of the trade of Iraq (Mesopotamia), 
but this was likewise true before the war, when Iraq was politically 
a part of the Ottoman Empire. The total foreign commerce of 
Mesopotamia amounts to between twenty and twenty-four million 
pounds sterling annually, of which something less than one-third is 
with the United Kingdom. At the present no important raw mate- 
rials are produced in Iraq; dates constitute about half of all the 
exports, although during the past few years there has been a marked 
increase in the quantities of barley and wheat shipped to foreign 
countries. Surely there is nothing in the foregoing figures which 
indicates that profits derived from trade of the Class A mandates 
would repay the mandatory powers even the cost of conquering 
these territories from the Ottoman Empire. 

As an offset to trade gains of the Allies by reason of their acquisi- 
tion of the mandated territories one must consider the financial cost 
of administering these regions. In Syria, the French have been 
obliged to maintain a military establishment of from twenty to 
seventy thousand men; the military expenses of France in Syria for 
the years 1919 to 1925 were more than two and a half billion francs. 
The total cost of the Syrian mandate to the French people has been 
well in excess of three billions of francs.2 In Palestine and Trans- 
jordan the British have had a less difficult task, but here again there 
have been heavy military and administrative expenses. If one 
examines the budget of Palestine, he will find that the mandate 

6The foregoing statistics concerning Syria are derived principally from the Commerce 
Year Book for 1925 (published by the Bureau of Foreign and Domestic Commerce at Wash- 
ington), the Annuaire Generale for 1926, and the reports on Syrian trade issued for 1922, 
1923, and 1926 by the Department of Overseas Trade at London. Mr. Kenneth P. Kirk- 
wood, of Columbia University, has been of great assistance in the collection and compilation 
of statistical data concerning the Near Eastern mandates. 

7Concerning Palestine see the Colonial Office report No. 15 (1925), No. 20 (10926); 
Statistical Abstract of the Board of Trade, Cmd. 1738 (1926); Philip Graves, Palestine, the 
Land of Three Faiths (New York, 1924). 

8 Statistical Abstract of the Board of Trade, 1926. 

9Annual Rapport sur la situation de la Syrie et du Liban, published by the Ministry of 


Foreign Affairs in Paris; L’Asie Francaise; 1922 to 1926, passim; see also P. T. Moon, 
Imperialism and World Politics (New York, 1926), pp. 489-492. The figures here given 


[47] 


| are, of course, in paper francs, 


220 


appears to be paying its own way. Actually, however, it has been 
necessary for Great Britain to arrange and guarantee a loan of four 
and a half million pounds to provide for future extraordinary ex- 
penses. Furthermore, the British taxpayer is burdened with the 
support of British military forces at Jerusalem and elsewhere. The 
total cost of maintaining the British infantry, air forces, and con- 
stabulary in Palestine in 1924 was about seven hundred thousand 
pounds; a portion of this sum was charged against the revenues of 
Palestine, but the balance has to be provided by grants-in-aid from 
the British Treasury. Such grants-in-aid up to March, 1925, were 
in excess of a million and a quarter pounds. Subsidies to the govern- 
ment of Transjordan from 1921 to 1925 amounted to more than 
half a million pounds sterling.” For Iraq the bill presented annually 
to the Parliament at Westminster has been even heavier—in fact, 
comparable in sum total to the French expenditures in Syria, ex- 
cept that a smaller proportion has been devoted to military purposes. 
From April, 1920, to March, 1926, the British taxpayer has contrib- 
uted more than seventy-seven and a half million pounds sterling 
to the maintenance of the mandate in Iraq—that is, more than three 
hundred and eighty million dollars, which in all probability cannot 
be recovered even in small part. And this does not include the full 
cost of the Royal Air Force in Iraq, on the theory that, like the Brit- 
ish Mediterranean fleet, it is devoted to the defence of all British 
interests in the Near and Middle East." Neither does it include 
the subsidies paid to various Arab potentates for the general pres- 
ervation of peace throughout the region.” 

And the cost of maintaining the mandates has not been in money 
alone. From 1919 to December, 1925, the French lost seven thousand 
men killed as a result of military operations in Syria, and the Druse 
rebellion was not suppressed until some six or seven months later. 
It took ninety thousand British and Indian troops to suppress the 
insurrection of 1920 in Iraq; in the fighting between July and Octo- 
ber of that year almost nine hundred men were killed and over 
twelve hundred were wounded from among the British forces. 

10 Report of the High Commissioner on ihe Administration of Palestine and Transjordan, 
Colonial No. 12 (1925) and No. 20 (1926); The Times (London), August 8, 1925. 

1 Daily Mail Year Book, 1927; Reports of His Britannic Majesty's Government on Admin- 
tstration of Iraq; The Times, September 30, 1925. 

12See an anonymous article ‘‘Downing Street and Arab Potentates,” in Foreign Affairs 
(New York), Volume V (1927), pp. 233-240. 


18 T.’Asie Francaise, January, 1926; J. de V. Loder The Truth About Mesopotamia, Pales- 
tine and Syria (London, 1923), pp. 93-95. 


[48 ] 


221 


No economic value can be placed upon the lives thus lost in the task 
of “pacification’’ of these former Ottoman territories, but it will 
be agreed by all impartial observers, under the circumstances, that 
the mandates in the Near East have been expensive, whatever the 
valuation placed upon human life.14 

Iraq may be taken as a fair example of the wide discrepancy which 
exists between the reputed economic resources of the mandated 
territories—the vast potential wealth which they represent in the 
popular mind—and the extent to which these resources actually 
have been capitalized by the mandatory powers. Mesopotamia is 
supposed to be flowing with oil—enough to supply the British navy, 
with quantities to spare. If such be the case, it is all to be demon- 
strated in the future, for as yet only negligible quantities of oil have 
been taken out of the ground since the British occupied northern 
Iraq in November, 1918. A British financial mission to Iraq in 1925 
had this to say concerning the petroleum situation: 


“We find that considerable expectations have been raised of 
additional revenue arising from two concessions recently 
granted, the Turkish Petroleum Company’s concession and the 
Asfar concession in connection with irrigation and cotton- 
growing projects. We hope that Iraq may in the future derive a 
large revenue from oil; but it would be rash to regard it asa 
certainty. The operations of the Turkish Petroleum Company 
must remain practically at a standstill until the determination of 
the northern frontier.’ Thereafter there must be long-con- 
tinued prospecting, and if the results of prospecting justify it, 
the construction of a pipe line [of over six hundred miles] to 
the Mediterranean. We do not anticipate that the Iraq Treas- 
ury will receive any appreciable revenue from the Turkish 
Petroleum Company’s operations for another seven years, 
and we have therefore left them out of consideration.’ 


It must likewise be remembered in this connection that the Turk- 
ish Petroleum Company, which possesses the concession for oil- 
prospecting in the Mosul area, is obligated to deliver to American 
and French companies half of all the crude oil taken out of the ground 
in Iraq—twenty-five per cent to a syndicate of sixty-seven French 


14 Although not all the casualties were among French and English boys—a high percent- 
age, in fact, was among colonials—the losses were a sad tragedy to the families concerned 
and a serious depletion of man power to their respective nations. 

18 The reference is to the Turco-Iraq boundary dispute concerning Mosul, subsequently 
settled by a League of Nations award and by friendly agreement between Great Britain 
and Turkey, 1926. 

18 Report of the Financial Mission to the Government of Irag (The Young-Vernon Mission), 
Cmd. 2438 (1925). 

[49 ] 4 


222 


companies, and twenty-five per cent to seven American companies ~ 
associated in the enterprise. Furthermore, the monopolistic priv- 
ileges claimed by the Turkish Petroleum Company have been 
surrendered in favor of an arrangement which is more consistent 
with the principle of the economic open door.!7 In short, it is un- 
known just how much oil there is to be had in Mesopotamia; and of 
the oil which actually materializes, the mandatory power is to re- 
ceive only half. This is far from coinciding with the popular con- 
ception that the entire British war debt could be liquidated from 
profits of the Mosul oil fields. However much oil there may be in 
Iraq, the British share will doubtless prove to be, in the words of 
Lord Grey, ‘‘the most expensive oil that any country has ever pur- 
chased. ’’17* 

Cotton is another commodity which Great Britain is said to be 
seeking in Mesopotamia—perhaps in sufficient quantities to emanci- 
pate Lancashire from dependence upon the United States. It is 
true that long before the war German economists looked longingly 
in the direction of Mesopotamia as a possible source of cotton supply. 
It is likewise true that just before the war British agricultural ex- 
perts conducted there experiments with the Egyptian plant which 
indicated that Iraq was capable of growing cotton the equal of the 
best. During and since the war these experiments have been con- 
tinued, and two British corporations, the Diala Cotton Plantations 
and the Eastern Irrigation, Ltd., have been awarded concessions— 
the former the so-called Asfar concession—by the government of 
Iraq for the development of cotton culture in that country. Actually, 
however, the total amount of land under cotton cultivation in Iraq 
in 1925 was only six hundred acres, and the prospect is not bright 
that the area will be materially increased in the near future. In 
any case, tens of thousands of pounds will have to be invested in 
irrigation works, and still additional tens of thousands of pounds 
will have to be sunk in rail and motor routes, before Mesopotamian 
cotton can be produced on a large scale. And even then, with the 
prevailing disturbances in the world cotton market, there is grave 
doubt whether it can be produced profitably.'8 

17 See E. M. Earle, ‘‘The Turkish Petroleum Company”, in the Political Science Quar- 
terly, Volume XXXIX (1924), pp. 265-270; ‘‘American Oil Interests in Mesopotamia,” 
Foreign Policy Association Information Service, Volume II, No. 6. 

waCjited in John Ise, The United States Oil Policy (New Haven, 1926), p. 


18See report of the Young-Vernon Mission previously cited. Also The Times Th pril rand 
21, 1926, 


[50 ] 


223 


Comparatively little space has been devoted here to the poten- 
tialities of the former German colonies in Africa. This negligence 
has been purposeful. The resources of the Class B and Class C 
mandates in Africa doubtless are considerable. (The Germans be- 
fore the war, however, considered them far from adequate for the 
needs of a great industrial power). But their ultimate contributions 
to the wealth of our late Allies must be determined in the future; 
they are not immediately estimable factors in so pressing a problem 
as the interallied debt and reparations. Furthermore, the resources 
of Africa must of necessity be common resources of mankind; they 
cannot be considered the exclusive preserve of the victorious powers 
of 1918. In the meantime, the cost of maintaining this vast empire 
in Africa may well offset most of the profit from the trade developed 
therein. These are questions for the future to determine. 

It must be constantly kept in mind that the mandates and their 
resources may not be disposed of at will. They are held in trust 
for the peoples of these backward countries and under mandate of 
the League of Nations. The principle of trusteeship involves res- 
ponsibilities to the native peoples, to the League, and to civilization 
at large. Ultimately no mandatory power can disregard these 
responsibilities. 

The first limitations upon the rights of the mandatory powers are 
those specified in Article 22 of the Covenant of the League of Nations. 
The letter and spirit of the Covenant’ require that the mandated 
territories shall be administered under such conditions as will “secure 
equal opportunities for the trade and commerce of other Members of 
the League.’”’® In the case of the Class B mandates in Africa there 
was a prohibition upon the “‘military training of the natives for 
other than police purposes and the defence of the territory’’ and 
upon such abuses as ‘‘ the slave trade, the arms traffic, and the liquor 
traffic.””4 Clearly the mandatory power cannot consider the peoples 

199E, P. MacCallum and E. M. Earle, ‘‘Trusteeship or Exploitation? An Appraisal of 
the Near Eastern Mandates.’’ In Asia, September 1926, pp. 792-798, 826-827. 

20 Although the passage within quotation marks appears only in the paragraph of the 
Covenant dealing with the Class B mandates, it has been the contention of the Govern- 
ment of the United States that it was intended to apply to the Class A mandates as well. 
See ‘‘Correspondence between His Majesty’s Government and the United States Ambassa- 
dor respecting Economic Rights in Mandated Territories,’ Parliamentary Papers, Cmd. 
675 (1921). See also W. R. Batsell, ‘‘The United States and the System of Mandates,’’ 
International Conciliation, No. 213, October, 1925. i 

21France objected strenuously to the limitations upon military service for the natives; 
hence in the mandates for the Cameroons and Togoland an exception was made which 
permitted service of native troops elsewhere than in defence of their own country. Actually, 


however, the French have not taken advantage of the provision, and have raised only about 
fifteen hundred native soldiers in the two territories. 


C51] 


224 


and lands under their control as subject to their arbitrary will or as 
the objects of old-fashioned and ruthless economic exploitation. 
Other powers members of the League cannot be debarred from rea- 
sonable opportunity to participate in the commerce and in the 
economic development of the mandates. In short, the mandates, 
properly administered, will be outstanding instances of the ‘‘open 
door.’ Article 22 of the Covenant clearly limits the economic 
value to the Allies of the mandated territories, since they must share 
the trade and commerce of the regions with all states members of the 
League. 

A second limitation is that imposed by treaty between the man- 
datory powers and states outside the League of Nations. The 
United States, for example, contended that although it did not join 
the League, it participated with the Allies in a common victory and 
should be permitted to participate in the common fruits of victory. 
Hence the United States has negotiated with the several mandatory 
powers conventions which confer upon the United States and its 
nationals substantially all the rights and benefits secured under the 
mandates to members of the League of Nations and their nationals. 
And in certain cases special rights are assured to Americans—as in 
Syria and Palestine, for example, where the right has been retained 
to maintain schools and to conduct instruction in the English lan- 
guage. Here again are restrictions upon the economic prerogatives 
of the Allies within the mandated) territories.” 

A third limitation is that itiposed by agreement between the 
mandatory power and the mandated territory. This is illustrated 
in the relations between Great Britain and Iraq, by which the former 
agrees to terminate the mandate in a period of twenty-five years, or 
sooner should Iraq earlier qualify for admission to the League of 
Nations.24 Where a time limit is thus specified, the mandatory 

For the text of Article 22 see The Treaties of Peace (2 volumes, the Carnegie Endowment 
for International Peace, 1924), Volume I, pp. 20-21. The provisions of the Covenant as 
regards the mandates were given effect in the terms of mandate drawn by each mandatory 
power and submitted to the Council of the League for approval. 

2% See Treaty Series of the United States for the following: Convention of December 3, 
1924, with Great Britain concerning Rights in Palestine (No. 728); conventions of February 
13, 1923, with France concerning Rights in the Cameroons and Togoland (Nos. 690 and 
691); convention of April 4, 1924, with France concerning Rights in Syria and Lebanon 
(No. 695); conventions of April 18, 1923, and January 21, 1924, with Belgium concerning 
Rights in East Africa (No. 704); conventions of February Io, 1925, with Great Britain 
concerning Rights in the Cameroons, East Africa, and Togoland (Nos. 743, 744, and 745). 
It is understood that a similar treaty is in process of negotiation with Great Britain con- 
cerning American interests in Iraq. 


24““Treaty with King Feisal signed at Baghdad, 13th January, 1926,” Parliamentary 
Papers, Cmd. 2587 (1926), 


[52] 


225 


power may hesitate to undertake economic commitments which go 
beyond the date set for the termination of the mandate. The prac- 
tical effect of this limitation has yet to be demonstrated by ex- 
perience, but it is a most encouraging sign of the possibilities of the 
mandate system. Great Britain does not possess interminable con- 
trol over the economic resources of Mesopotamia. 

One final limitation should be noted upon the power of the Allies 
to utilize the mandated territories as means of partially liquidating 
their war debts. This limitation is the fact that certain of the man- 
dates have been assigned to the British Dominions. South Africa, 
for example, which holds the mandate for Southwest Africa, contrib- 
utes nothing directly to the treasury of Great Britain. In so far 
as she exploits the resources of Southwest Africa, it will be in herown 
interest not in the interest of the mother country. Hence none of the 
financial or economic profits of the administration of Southwest 
Africa will be available for the settlement of Anglo-American obliga- 
tions growing out of the Great War. To be sure, Southwest Africa 
will be part of the economic system of the British Empire, but that 
fact cannot be translated into terms of dollar credits. 

There can be no doubt that the mandates are areas of potential 
wealth, some of which will find its way into the public treasuries of 
the Allied Powers and more of which will be available to their na- 
tionals. But the mandates were not acquired without sacrifices— 
the loss of tens of thousands of lives and the expenditure of hundreds 
of millions of dollars, both in the processes of conquest and in the 
processes of pacification after the war. As has been shown, they are 
not even now an unmixed blessing to their trustees, for they present 
serious political, fiscal, and racial problems; they require defence 
not merely against external aggression but against disruptive and 
rebellious forces from within. Their economic resources, as yet 
largely undeveloped, cannot be discounted and converted into values 
available for the settlement of heavy international payments to the 
United States. They are not colonies in the ordinary sense of the 
word, and they cannot be readily exploited for predatory imperialist 
purposes. Where their administration has been unsatisfactory—as 
in Syria—they have incurred serious losses in prestige to the manda- 
tory power. Americans as a whole may ascribe to the mandated 
territories an economic value far in excess of reasonable expecta- 
tions. But where is the American who would accept any of the man- 


[53] 


226 


dates as part payment of the outstanding obligations of the Allies 
to the United States? And why is there none such? Is it altogether 
because of the traditional American policy of isolation, or is it partly 
because of a realization that the mandates are and must for some 
time continue to be a serious drain upon any power which under- 
takes their administration? 


[54 ] 


227 


LETTER TO THE PRESIDENT 


BY FREDERICK W. PEABODY 


Counsellor-at-Law, Ashburnham, Massachusetts 
Member of the Bar of New York, Massachusetts, California 


June 30, 1926. 
The President of the United States, Washington, D. C. 


Mr. PRESIDENT: 


There is no more firmly established right under the laws and cus- 
toms of the United States than that of a citizen, however humble, to 
petition the Government for the redress of a grievance. Iam sucha 
citizen, American in every fibre and bone and drop of blood. For 
seven generations on my father’s side and for seven generations on 
my mother’s my ancestors have lived in America, a hundred and 
fifty years as American subjects of the British crown, a hundred and 
fifty years as American Citizens. I am therefore qualified, am I not, 
to avail myself of the aforesaid right? 

My grievance is briefly stated. It is this: America is being sold, 
betrayed, dishonored. By its own Government, the Nation is being 
made odious in the estimation of mankind, the object of universal 
hatred as a merciless, money-grabbing extortioner. Availing itself 
of a pure technicality, the Government of the United States is ex- 
acting the payment of unthinkable sums of money from England, 
France, Belgium, and Italy for advances made to them upon our 
entrance of the late war and by our law declared to be ‘‘for the 
purpose of the more effectually providing for the national security and 
defence.”” To enable ‘the Governments engaged in war with the 
enemies of the United States’’ to maintain their armies, to fight 
America’s battles until we could prepare armies to do our own fight- 
ing, to stand between us and Germany, we advanced our late asso- 
ciates something like ten billions of dollars. Every dollar of it was 
for our benefit, we so stated at the time, and now we demand its 
repayment with eleven billion dollars more for time in which to pay. 

Plainly expressed, my grievance is that the honor of my Country 
is being bartered for twenty-one billion dollars, and I address this 


[55] 


228 


petition to my government for a redress of that grievance in the 
performance of the most solemn duty of American Citizenship— 
the preservation of the Nation from history’s brand of shame. 

Be patient with me, Mr. President, for I am a plain, blunt man, 
little skilled in the use of soft phrases. I can only speak right on, 
tell you that which you know full well, set forth the simple facts as 
they appear to simple men and bid them speak for me; but do not 
think that I stand alone, a solitary voice crying in the wilderness. 
By my side is every American who loves his Country more than he 
loves money, is jealous of his Country’s reputation, holds his life of 
far less value than that most sacred of all things, his Country’s 
honor. And their name is legion. There are no hyphenates amongst 
them, no sympathizers with our late enemies. Aside from my own 
conviction, I know whereof I speak for I have on my desk assurance 
thereof from all parts of the Country. 

True, there are those who have said that I but waste my breath; 
that this Nation is a nation of Mammon worshippers, that gold is 
their god, that they have but one absorbing passion—to get all 
the money they can for the gratification of every selfish desire. 
If I did not, in the depths of my soul, believe that to be a lie, I should 
indeed know that I but waste my breath. 

Then, too, Mr. President, I have been told that you will not even 
read my petition. It may beso; but that does not discharge me from 
the obligation that presses upon my conscience and my heart. Others 
will read it, if you do not. 

The World War beganon August Ist, 1914, and ended on Novem- 
ber 11th, 1918. For upwards of two years and a half it was waged 
without our participation. A hundred and more Americans were 
murdered by the Germans, when, without warning, they sank the 
Lusitania. We resented it only by diplomatic notes couched in 
respectful terms. America witnessed the brutal rape of Belgium, 
but heeded not her protest,—a failure on our part Theodore Roose- 
velt regarded “with horror.’’ Our Mother Country and France, 
our Saviour, were decimated by an unprovoked and ruthless Ger- 
many, and we remained ‘neutral even in thought.” During the 
period of our neutrality, our manufacturers furnished supplies to 
the combatants at exorbitant rates, our national wealth mounted 
by leaps and bounds and our labor received large increases of wage. 
The United States uttered no word of sympathy, by not so much as 


[56] 


229 


a turn of the hand helped those whose cause we subsequently, by 
joining them, recognized as just. Our ultimate participation was 
inevitable; but nothing whatever was done to prepare for it and when 
our war declaration came in April, 1917, we were totally unready 
to put a man on the battle fields of France and it was more than a 
year thereafter before we had any share in the fighting. 

Upon our entrance of the war, it was perfectly plain to the Gov- 
ernment of the United States that, if we were not to be left to face 
Germany alone, our associates, Great Britain, France, Belgium and 
Italy must be maintained by us with all necessary supplies until we 
could join them in the field. The security and defence of the United 
States imperatively demanded it at whatever cost. The allies needed 
it for their own interest, of course; but they needed it before we went 
into the war and only got it when it would be of benefit to the United 
States, when it became a matter of necessity to us, a legitimate, an 
inevitable war measure. There can be no two opinions about this, 
for the Government of the United States so declared. 

In his Speech to Congress asking a declaration of war against 
Germany, the President definitely pledged ‘‘our lives and our for- 
tunes, everything we are and everything we have”’ to its prosecu- 
tion. He didn’t suggest loans for our defence to be repaid with 
interest. He committed America to the contribution of everything 
we had to the winning of the war, and Congress promptly proceeded 
to carry out his pledge. 

In little more than a week thereafter, Congress voted to make the 
war supplies that had accumulated in the Country available to the 
allies, as the law put it, ‘“‘to the Governments engaged in war with 
the enemies of the United States.’’ This act of the national legis- 
lature providing for the establishment of credits in favor of ‘“‘the 
governments engaged in war with the enemies of the United States” 
opened with words that should be known to every citizen as well 
as they are known to you and to me. But for them, this petition 
would not be sent to you. These words (would that they might be 
blazed across the sky!) were: ‘‘ For the purpose of more effectually 
providing for the national security and defence and for prosecuting 
the war.” 

How could anything be plainer than that? The credits were estab- 
lished and some nine billions and a half of dollars were advanced 
to our associates in the war, solely and only the more effectually to 


[57] 


230 


provide for the security and defence of the United States; in other 
words, to enable the war-weary allies to prosecute the war alone 
against the enemies of the United States until we could join them, 
and thus save us from having to fight Germany without allies, or 
crawl on our knees at her feet. 

It was our bounden and officially avowed duty thus to defend 
America, as well as our only way possible for upwards of a year after 
we entered the war. And America performed her duty as became 
America. She poured out money like water. While her associates 
were holding the trenches with men, America was helping them with 
money. All that was done in battle during the first year of our war 
with Germany to save us from the catastrophe of having to stand 
against her alone was done by Great Britain and Belgium and France 
and Italy. All the blood shed was British and Belgian and French 
and Italian blood, not a drop of it was American. Our money was 
used both for them and for us; and their blood was shed for us and 
for themselves. 

Has it ever occurred to you, Mr. President, to estimate the value 
in dollars and cents of the lives saved to America by our non-partici- 
pation in the fighting for more than a year, actually for five-sixths 
of our war period? As I think it has not, I will give you the estimate 
of anexpert. Ina letter in The New York Times of April 3rd, I said: 
“We have heard much about what our.allies owe us, but who has 
said anything about what we owe them?”’ An answer to that query 
is before me. It is from an active Colonel of our regular army, who 
was in service in France. He says: 

“‘T feel sure that you did ‘express the sentiments of countless 
Americans to whom the dishonor of America is as personal dishonor’ 
and who resent the actions of those who are placing us in the cate- 
gory of the Shylock. You ask very rightly what we owe our allies. 
To this question I reply by submitting from memory a few figures 
and data of what might justly be considered our debts to our allies, 
as follows: Total time in war April 6, 1917 to November 11, 1918, 
19 months, 5 days. 

‘‘While we were represented in the fighting prior to September 
12, 1918 in several engagements, by units in size from a regiment to 
a division, we did not take a man’s part in the fighting until Septem- 
ber 12, 1918, when we, with allied assistance, took the St. Michael 
Salient. 


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“Tt therefore seems that we do ourselves full justice when we 
say we did a man’s share of the fighting for the last three months 
of the war. For the sake of easy computation, however, let us say 
we took a full part in the fighting one-sixth of the full period of nine- 
teen months, five days, which is quite a bit more than we can justly 
claim. 

“Then, for one-sixth of the war period our losses were approxi- 
mately: killed, 50,000; wounded, 210,000. Placing a value of 
$50,000 on each young man we lost, our life cost expressed in money, 
was two and a half billions of dollars. 

“According to a report of the Medical Department, U. S. Army, 
the cost to the Government of those wounded during the same 
period of our activity was, up to June 30, 1925, just over three bil- 
lions of dollars. So the total cost of killed and wounded was five 
billion and a half dollars, disregarding the continuing cost of the 
wounded. 

“‘Since the enemy was on the run during the greater part of the 
period of our active participation in the fighting, it is fair to assume 
that our losses per month were less than they would have been the 
first five-sixths of the time and before the enemy had broken. To 
be conservative, however, let us assume that they would have been 
the same. Then our losses, in men killed, would have been three 
hundred thousand, and, in wounded, a million two hundred thou- 
sand—or, expressed in money, thirty-three billions of dollars. The 
saving to us, due to our allies doing our fighting for five-sixths of 
our war time, is therefore twenty-seven and a half billions of dollars.” 

So it appears, Mr. President, according to this army expert, that 
our debt to our allies is upwards of twenty-seven and a half billion 
dollars, three times the amount of the credits accorded them by us, 
not to mention what we owe them for having saved us in averting a 
contest between the United States and her enemies alone. 

Now doesn’t it appear to you, as it does to me, to be a monstrous 
thing to demand the return of the advances made for our own bene- 
fit to our allies with more than a hundred per cent additional we call 
interest, and to ignore our monumental obligation to them, for which 
they ask nothing? 

For obvious reasons the name of my army correspondent cannot 
be disclosed; but I may give you the name of another army officer, 
in calling your attention to what he thinks about these alleged 


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debts. In a speech at Denver in August, 1924, the Commander- 
in-Chief of the American armies in France said: 

‘“‘What was the situation in 1917? We had no plan, no prepara- 
tion, no artillery, no transportation, no ships, in fact nothing.” 

“Tf it had not been that the allies were able to hold the lines for 
fifteen months after we had entered the war, hold them with the 
support of loans we made, the war might well have been lost. We 
scarcely realize what those loans meant to them and to us.” 

“While I am on the subject, I want to say something I have never 
said in a public address before.” 

‘Tt seems to me there is some middle ground where we should 
bear a certain part of the expense in maintaining the allied armies 
on the front, while we were preparing, instead of calling all this 
money a loan and insisting on its payment.” 

“We were responsible. We gave the money knowing it would be 
used to hold the Boche until we could prepare. Fifteen months! 
Think of it! We sent our first men in June and they were not ready 
to go into the front lines until the following year.” 

What support, Mr. President, does the Government derive from 
this bravely uttered judgment of General John J. Pershing? Would 
that he might tell us, even more candidly, what he feels deep down 
in his heart. 

The Government of the United States bases its right to demand 
repayment upon the merest technicality, a naked promise. It would 
seem that somebody in authority took advantage of the great need 
of our associates to require of them a promise to repay money ad- 
vanced for our security and defence, and that, God knows, was so 
used. It was a mean and un-American thing under such circum- 
stances, and in any court of morals, before any tribunal of honor, 
yes, as justice is administered between man and man, in any court 
of law the United States would have no standing whatever. You 
and I, as lawyers, know that an agreement made without con- 
sideration is of no effect. As Ihave shown, and shall further show, 
the allies gave full value for the money they received and the agree- 
ment to repay is void for want of consideration. What man of fair 
mind and honorable instincts can say that the United States Govern- 
ment has not enacted the rédle of a cruel and harsh extortioner in 
the matter of these so-called debts? 

The money functioned for us at first precisely as our soldiers did 


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afterward, both for the security and defence of the United States, 
and both for the prosecution of the war. With precisely as much 
justice might we demand indemnity for the whole cost of our mili- 
tary establishment; both were in the same sense legitimate war costs. 
Was it an oversight that such a demand was not made? Wasn't 
there any ground, however technical, upon which such a demand 
might have been based? How greatly must those, who have been 
pluming themselves over the negotiation of the funding agreements, 
regret that there wasn’t even the shadow of a right upon which a 
demand for all the cost of the war might be based. 

Let us glance in turn at the case of England, of Belgium, of France, 
of Italy. 

Englishmen or men of English stock, of your stock as of mine, 
established this government. And it was a German king of England, 
over the protest of the greatest Englishmen of his time, who sought 
to hold the colonies in subjection. We and the English are of one 
blood, speak the same language, cherish the same far-away tradi- 
tions, glory in the same literature, and, by our adoption, have fun- 
damentally the same law. England and America should be close 
and trustful friends. Together, the great British Empire and the 
great American Republic could easily ensure perpetual peace to the 
world. How have we treated England? 

England (meaning Great Britain) loaned her allies something like 
ten billion dollars, but not as a substitute for men. Upon the in- 
vasion of Belgium, she entered the war with her armies, and, before 
the awful death list made conscription necessary, enlisted four mil- 
lion volunteers. England did that—loaned ten billion dollars, 
recruited four million volunteers. 

As a substitute for men, we advanced England something more 
than four billions, under the law authorizing its payment for our 
security and defence. While her young men were dying by the hun- 
dred thousand in the trenches, fighting our fight as much as their 
own for more than a year, the war was not costing usa man. We 
did what we could. We helped England keep her soldiers in fighting 
trim by furnishing money for supplies produced in America. Eng- 
land asks nothing for her dead. We demand repayment of our 
money, with interest. We are the richest nation the world has ever 
known. England is embarrassed as never before. With a million 
unemployed, she carries a huge burden of debt and has resorted to a 


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taxation almost confiscatory. America taxes an income of $5,000 
but $37.50; England taxes it $787. She is dependent for her revenue 
upon her trade and our tariff wall practically excludes her from 
trade with us. Nothing is undamaged, but her honor; nothing un- 
shaken but the unshakable steadiness of her soul. And yet we, the 
Croesus-nation, demand of struggling, staggering England, not only 
the four billions we let her have, but an additional seven billions 
because she must have time in which to pay. Because she is in 
trouble, we charge her seven billion dollars for time. We have no 
moral right to a farthing from England, but she signed and we hold 
her to her signature. 

Mr. President, what do you, as a man, think of the way we have 
treated England? What I think of it is of no consequence. What is 
of consequence is what the world thinks of it, what America thinks 
of it, what posterity, what history will think of it. It may be that, 
in time, language will contain words that will adequately charac- 
terize it. They are wanting in my vocabulary. 

England proposed cancellation of all war debts at a net cost to her 
of six billion dollars, inasmuch as the nations owe her that amount 
over and above what she is said to owe us. We declined the proposal 
and demand the uttermost farthing; and England now agrees to 
forgive her debtors all they owe her in excess of the amount we re- 
quire of her. A striking contrast, that. 

Take Belgium—you remember how the world held its breath when 
Germany, unprovoked and in violation of her guarantee of Belgian 
neutrality, thundered into Belgium, laid her cities waste, massacred 
her civilians, all but annihilated her little army and swept the 
remnant over into France. Belgium might have bought immunity 
at the cost of honor. That was not Belgium’s way. She was in honor 
bound to resist the encroachment upon her neutrality, to stand on 
her own soil between Germany and France. She was not even 
tempted to save herself. She preserved her honor intact. She stood 
her ground until the German monster crushed her. 

Belgium is a tiny kingdom, a quarter of the size of New York and 
with a population about two-thirds as large. We made the same 
kind of advances to Belgium as to England and we furnished her 
starving people with food. Belgium also signed, and we have called 
her attention to her signature and demanded repayment for the food 
as well as the credits, 


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With a greatly reduced man power, Belgium has been struggling to 
rebuild her ruined cities. Her taxation is excessive. Incomes of 
$5,000 pay $620, instead of $37.50 as here; but she is great of heart 
and endures. All the other nations have forgiven her debt to them. 
Only the United States insists upon payment, although President 
Wilson joined with the other powers in the agreement not to ask 
Belgium to pay. We demand payment of every dollar for food and 
advances to little Belgium; and, because she is pitiably poor and must 
have time, we make her pay for it. The food and advances totalled 
(in round numbers) three hundred and seventy-seven millions. We 
exact every cent of it and charge her an additional three hundred 
and fifty million for time,—in all seven hundred and twenty-eight 
million dollars, the equivalent of a hundred dollars for every man, 
woman and child in the kingdom. The other nations forgive her 
eight hundred millions of principal. Another contrast, not exactly 
pleasing to contemplate. 

How is it possible, unless the American people are the most detest- 
able people on the face of the earth for the Government of the 
United States to justify such a performance as expressing the will 
of the people? It is a baseless assumption, and the action of the 
Government is a hideous perversion of the popular will. 

Then there is France, Mr. President. France that came to our 
assistance when our struggle for national existence was all but lost. 
Washington himself was almost in despair. ‘‘We are at the end of 
our tether,’’ he said, ‘‘and now or never our deliverance must come.” 

Deliverance came—and from France. Across the ocean she sent 
us large sums of money, as gifts and as loans, and she sent armies 
and ships of war. France saved America. There is no controversy 
about that. Yorktown was captured and Cornwallis surrendered 
because Washington had under his command more French sailors 
and soldiers, than Americans; and it was Washington who declared 
that America would cherish ‘unalterable gratitude’? to France. 

How has our “‘unalterable gratitude’”’ been shown by the Govern- 
ment of the United States? 

France, too, obtained credits from us upon our entrance of the 
war, and they were for the same legally declared purpose, the more 
effectual national security and defence; and France also appended her 
signature to the bond. The United States, through its constituted 
authorities, has demanded repayment. France is dreadfully poor 


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and heavily taxed, incomesof $5,000 paying $839 instead of our $37.50. 
Her war debt is enormous and to it has been added a debt of many 
billions for the rebuilding of the regions devastated by German 
cannon. Struggling bravely to keep herself financially above water, 
the United States adds to her burden a weight well calculated to 
sink her. Of all the great European combatants in the war, France 
is the greatest sufferer and Germany the least. 

We are literally glutted with wealth, far richer than any other 
nation has ever been in all the history of the world; and, with posi- 
tively threatening aspect, we point to France’s signature and demand 
that she pay. 

While America was putting only money into French battlefields, 
France was holding Germany, as was England, at the cost of hundreds 
of thousands of her young men. When America had not one man in 
the French trenches, France was raising a barrier of her slain sons 
over which Imperial Germany had not the might to pass. A barrier 
for France, do you say? Yes, a barrier for France and a barrier for 
the United States of America. Had Germany passed that barrier 
of French dead and trampled France beneath her feet, she would 
have triumphed over all but the United States, and America would 
have been left to continue the war alone. Visualize that, Mr. Presi- 
dent, and you will realize what France did for America. And now, 
Almighty God! we demand of France the return of every dollar we 
gave her and penalize her for time in which to pay. Where is Wash- 
ington’s ‘‘unalterable gratitude?’’ Where is the common decency 
that dwells in the heart of the ordinarily decent man? O shame, 
where is thy blush? 

In morals, in justice, in law, France doesn’t owe us one centime, 
one-fifth of a cent, and we owe her for a second ‘‘deliverance,” a 
second salvation. She got nothing but what our Government de- 
clared to be for the security and defence of this nation. According 
to Colonel —, France with England and Belgium saved us 
a quarter of a million lives and a million wounded—expressed in 
money, twenty-seven and a half billions of dollars. All the wealth 
of the world could not pay her for what she did for us—and she asks 
nothing; while we demand of France repayment of three billion and 
a half dollars we gave her in place of men and, because she can’t 
put her hand on the amount and pay spot cash, an additional three 
billion and a half for time. 


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I am altogether at a loss for words to characterize that action 
by the Government of my Country. The first man to occupy the 
office you now hold, Mr. President, had a forceful way of expressing 
himself on occasions. Washington knew of our earlier debt to France 
(now many times magnified) and he loved Lafayette, he said, as if 
he were his own son. If the grave of Washington could speak aloud 
to the grave of Lafayette, the thunder of its damnation of our treat- 
ment of France would resound throughout America and echo around 
the world. 

The same thing is true of Italy. The financial condition of Italy 
may be judged from the wage of a dollar and a quarter a day paid 
her skilled labor compared with ten and twelve dollars paid here, 
and her tax of $1,025 on an income of $5,000 compared with ours 
of $37.50. Italy isa nation of the very poor and we are a nation of 
the very rich. For effectually providing for our national security 
and defence we advanced poor Italy, who also signed on the dotted 
line, a billion six hundred and forty-seven thousand dollars. We 
insist upon its repayment and, because it is impossible for her to pay 
at once, we charge her three-quarters of a billion in addition—for 
time. 

Now then, for the totals: We advanced these four governments 
engaged in war with the enemies of the United States something less 
than nine billions and a half dollars and, upon a pure technicality, 
have demanded and they have agreed to pay not only the principal 
sum, but upwards of eleven billions for nothing but time—the total 
exaction by the United States from its late war associates and friends 
being over twenty-one billions of dollars,—a billion more than the 
amount of our national debt. 

These four nations have been looking to German reparation 
payments to recover some of their war costs. Especially has France 
counted upon them for the expense of rebuilding her devastated 
regions; but our demands will annually take about sixty per cent 
of the German payments, if made. Much more than half of what a 
defeated Germany hands over to her former enemies to indemnify 
them for destruction wrought by German guns in an aggressive and 
unprovoked war, our Government intends to take from its war asso- 
ciates for a part of the cost of keeping their soldiers fit to fight ‘the 
enemies of the United States” for our “‘security’’ and to die in our 
“defence.” The German payments cease after 35 years; those of 


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our friends continue for 27 years thereafter and, in the end, we shall 
have exacted more than the total of German reparations. They, 


especially France, have begged that we make their payments to us — 
dependent upon their collections from Germany. We have refused — 


and insisted upon prompt payment according to the bond whether 
Germany pays or not. In the case of France, what an exhibition of 
America’s conception of ‘‘unalterable gratitude!” 

I am addressing the President of the United States and want to 
maintain an attitude of courtesy as becomes a citizen in addressing 
his President. I may not say to you just what I should say to Calvin 
Coolidge, were he, like me, a private citizen of the Commonwealth 
of Massachusetts; but were he such a citizen, I should not hesitate 
to say to him that the cruelty of the Government of the United States 
in this matter seems to me absolutely barbaric, its greed to attain 
proportions that may fitly be called infinite. 

When these incalculable sums have been paid (which Heaven 
forbid), how will it leave the United States? What will this Nation 
be able to say it did for the prosecution of the war for the first fifteen 
months of our participation? Nothing. Our associates will have 
prosecuted the war, fought our battles, saved a quarter of a million 
American lives and a million American wounded or, expressed in 
money, twenty-seven and a half billion dollars, and averted a contest 
between the United States and Germany alone—and they will have 
done all this without the help of a man or a dollar from us. 

In all sincerity, it seems to me America is more to be commiserated 
than our late associates; for they have only assumed unjust obliga- 
tions of monstrous proportions, while the United States has made 


a cheap sacrifice of its honor. What a trivial price for a nation’s — 


honor—twenty-one billions! 

Can the United States afford to be wholly indifferent to the 
judgment of the world? A competent observer, who has visited 
Europe every year since the war, says that all the local hatreds have 
been combined in one ‘‘grand hatred’”’ of America. A lady living 
at Nice writes me that she has frequently seen French peasants spit 
at the mention of America, that we are called “‘the hogs’ country” 
and that at a dinner recently attended by distinguished guests it 


was said that “‘if the world could be pictured as a mammoth body, © 


America would be its stomach.”” The well-known American publicist, 
Mr. Frank H. Simonds, publicly declared, only a few days ago, that 


[66 ] 


239 


“one of the two outstanding circumstances of Europe today is the 
rapid development of a common European dislike and worst of the 
United States, from Land’s End to the Golden Horn,” and he adds, 
“Tf I for one moment believed the debt settlements which have been 
made would last, would be carried out for even a decade, I should 
regard the European feeling with real alarm.” 

Alarm, Mr. President? Why alarm? Because the unconscionable 
settlements, naturally and inevitably breeding hatred, which is the 
hotbed of war, will drag us or our children into another Armageddon 
in which alone we shall face a hostile world? What nation, staggering 
under the unrighteous burden we have placed upon it, would, or could, 
help us? We are a friendless people and our destruction would be 
the salvation of our debtors. 

But the Government of the United States is not wholly without 
applause. Germany applauds. Our late enemy cordially approves 
our treatment of our late friends. The heavier the burden we place 
upon England and France, the more profound will be the satisfac- 
tion, in Germany; and, if the funding agreements shake England to 
her foundations, if they sink France into hopeless bankruptcy, 
Germany and Germans, wherever they may be scattered over the 
face of the earth, will shout-aloud and clap their hands for joy. 

And for all of this, America has to-thank the Congress of the 
United States. Its members well know its action to be morally 
indefensible; know that every dollar of the money advanced to our 
associates was advanced for our own benefit and used for our benefit 
and that it benefited us incalculably. When the measure providing 
for these advances was being discussed in Congress, leading repre- 
sentatives and senators loudly proclaimed them to be solely for the 
security and defence of the United States as declared in the law 
itself. Let me remind you of some of these utterances. 

Senator McCumber, Chairman of the finance committee, said: 
“Tt is probably true that more than a quarter of a million men are 
going down to death or being wounded or captured, every month 
during the contest. Therefore while they are suffering to that ex- 
tent we ought to be mighty liberal in the expenditure of money 
when we can take no part in the real battle, which today is the battle 
of the American people.” 

While our associates were suffering so in ‘‘the battle of the Ameri- 
can people,’”’ we were suffering not at all—contributing money only 


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240 


to enable them to continue to fight that battle. Now we demand the 
return of the money. 

Senator Smoot said: ‘‘I think that every dollar that will be ex- 
pended under the provisions of this bill, if it is expended honestly, 
will be for the benefit of the United States.” 

And we demand the return of every dollar so expended for ‘the 
benefit of the United States” and eleven billion dollars additional 
for time. 

Senator Kenyon said: ‘‘I want to say this for myself that I hope 
one of these loans, if we make it, will never be paid and that we will 
never ask that it be paid. ‘We owe more to the Republic of France 
for what it has done for us than we can ever repay. I never want to 
see this Government ask France to return the loan we may make 
to her.” 

If this distinguished Senator of 1917 were in the Senate today, 
he’d see this Government demanding not only the principal of the sum 
advanced to France, but three billion and a half dollars interest 
upon it. 

Senator Cummings said: ‘‘I am perfectly willing to give to any 
of the allied nations the money which they need to carry on our 
war, for it is now our war. I would give it just as freely as I would 
vote to equip our army or to maintain our own navy.” 

We equipped other armies ‘‘to carry on our war,” because we 
didn’t have armies of our own to do it, and now we demand a return 
of the money for that equipment. 

Congressman Mann said: ‘I think it is our highest duty in the 
making of war to give aid to those who are fighting the enemy against 
whom we have declared war.” 

Wherever and whenever such a thing could be done in the wars 
of history, it has been done; but the history of the world will be 
searched in vain for any other demand by a government for the 
return of money given an ally to do the fighting for it. The dis- 
tinction is exclusively ours. 

Congressman Fordney said: ‘‘Their [the advances] only purpose 
is to aid them in the best way possible to fight our battles across the 
sea without calling upon our men to go there.” 

And now we demand the return of every gun, every shell, every 
rifle, every bullet, every reel of barbed wire, every gallon of oil and 
bushel of oats and barrel of flour we gave our associates so that they 


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241 


might continue to ‘fight our battles across the sea,” or their equiv- 
alent in cash plus interest. 

Congressman Mondell said: ‘‘ We can [by the advances] effectively 
and in the immediate future, arm, strengthen and support those who 
are, since our declaration of war, fighting our battles.”’ 

And for the cost of arming and strengthening and supporting our 
friends to fight our battles we want payment in full, doubled. 

Congressman Rainey said: ‘‘We are making this loan in order to 
further our interests primarily in this war, and from the moment 
when the Congress of the United States declared that a state of war 
existed between this Country and Germany, every blow struck 
at Germany by any of her enemies was struck also in our interest.” 

And this same Congressman filed a minority report in the House 
of Representatives protesting that seven billion was not enough to 
wring out of France in payment for the weapon we put into her hands 
and with which she struck Germany ‘“‘in our interest.” 

Congressman Madden said: ‘‘We are starting out to win a vic- 
tory, as I understand it, to maintain American rights; and if we can 
maintain American rights by furnishing money to somebody willing 
to fight our battles until we are prepared to fight those battles for 
ourselves, we ought to do it.” 

The victory was won, only because somebody was willing and, by 
our money was enabled, to fight our battles for five-sixths of our 
period in the war; and now we demand the money back, reimburse- 
ment for having done nothing but our plain duty, but make no offer 
to return hundreds of thousands of somebodies’ sons killed in what 
these eminent Senators and Congressmen declared to be our battles 
in our war. 

You are a Christian, Mr. President, and have recently declared 
this Government to be founded upon religion. You can mean only 
the Christian religion. May I most respectfully ask what Christian 
consideration entered into the funding agreements? what sanction 
they, in your opinion, derive from any teaching of Christ? You are 
silent. 

One of the most beautiful passages in the recorded utterances of 
Christ is this: ‘‘When the Son of Man shall come in his glory and all 
the holy angels with him, then shall he sit upon the throne of his 
glory, and before him shall be gathered all nations, and he shall 
separate them one from another, as a shepherd divideth his sheep 


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242 


from the goats. And he shall set the sheep on his right hand and 
the goats on his left.” And what is it that, in that day, Christ shall 
say to those on his left hand, because they were without charity, 
without sympathy, without concern for suffering humanity, because 
they were wholly selfish and had no regard for right and duty and 
justice? It is recorded that he shall say to them, ‘‘ Depart from me, 
ye cursed.”” And where, unless it repent, in that day of judgment 
shall he set this nation, if not at his left hand? 

What mandate has your administration received from the people 
of the United States to do the things you have done? Upon what 
authority has your Government assumed so to act for them? What 
better right have you to assume that the Government has truly 
represented them in the matter, than I have to assume that the Gov- 
ernment has misrepresented them shamefully? The difference 
between your assumption and mine is this: yours takes it for granted 
that money is America’s god; that we are a nation of money-grabbers, 
without conscience, gratitude, loyalty, magnanimity, justice or 
honor: while mine is based upon the ineradicable, the burning con- 
viction that Americans are just and generous and loyal and of one 
mind in the belief that it profiteth a nation nothing to gain the whole 
world and lose its own soul. 

You have my grievance, Mr. President, set forth as clearly as my 
poor abilities permit; and the redress I ask, nay, demand, is can- 
cellation of every dollar and cent of debt arising out of advances to 
those governments engaged in war with the enemies of the United 
States, for the security and defence of this nation. I ask, I demand, 
it on behalf of myself and every American who loves his Country 
and has in his breast a spark of honor. 


““Once to every man and nation comes the moment to decide, 
In the strife of truth with falsehood for the good or evil side.” 


That moment for this Nation, Mr. President, is now. Now must 
America choose whether it will serve God or Mammon. Both it 
cannot serve. If it choose God, by exalting honor above money, 
magnanimity above greed, Americanism above commercialism, the 
Samaritan above the pawnbroker, then shall the glorious flag of 
the Republic again float unstained in the air, every star resplendent, 
every stripe redignified, reglorified. The whole world will look upon 
it with respect bordering upon reverence and thankfulness amounting 
to love. 

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If it choose Mammon, Mr. President, if it sacrifice the world’s 
respect and good-will for gain, if it barter the Nation’s honor for 
twenty-one billions or twenty-one trillions of dollars, wherever it 
circulates the eyes of the world will see only the face of Shylock upon 
the Nation’s coin, and, wherever it floats, only dollar signs where the 
stars glitter in the Nation’s flag, and, in place of its stripes of red, 
yellow bars of gold. 

May the just God, who presides over the destiny of nations, 
arouse the lovers of America to demand and procure the cancellation 
of every dollar said to be due us for money advanced to ‘‘the Government 
engaged in war with the enemies of the United States’’ for the ‘‘ purpose 
of more effectually providing for the national security and defence.” 
So shall they vindicate the honor of America in the august tribunal 
of World-opinion. 

I have the honor to be, Mr. President, 


Your most obedient servant, 
FREDERICK W. PEABODY. 


[71] 


—— 


244 


SECRETARY OF THE TREASURY MELLON’S REPLY TO 
FREDERICK W. PEABODY’S LETTER TO THE 
PRESIDENT 


July 14, 1926 
Dear Sir: 


By reference from the President, I have your letter of June 30, 
1926, urging cancellation by the United States of the so-called war 
debts. Your arguments are confused, but I believe your points can 
be fairly summarized as follows: 


1. Asa legal proposition, taking into account the message of 
President Wilson, the debates in Congress and the First Liberty Loan 
Act authorizing advances to our Allies, the United States made a 
gift and not a loan and neither party expected repayment. 

2. As an equitable proposition, advances were made while the 
Allies were fighting our battle for us and before we could put an 
adequate military forcein the field, and, therefore, the loans rep-_ 
resent part of the cost to us of the war and should be cancelled. | 

3. Asa charitable proposition, America being wealthy and pros- 
perous and the European countries being poor and heavily taxed, — 
we should in the interests of humanity, cancel the debts. 

The initial authority for the advances to foreign governments oc- 
curs in the First Liberty Loan Act, passed just after we declared 
war. Asa lawyer, you know that the interpretation of legislation 
unambiguous on its face is determined from its language and not 
from expressions in debates on the floor of the Congress. But even 
ignoring this rule of construction, a reading of President Wilson’s | 
message and of the debates shows no ground for your arguments. 
The most that can be said of any expression you quote is a willing- 
ness on the part of the speaker to make the loans even if our debtors” 
may not be good risks. This is far from an intention to make a gift 
of the advances. Let us, however, consider the Act itself. The law 
is declared to be ‘‘for the purpose of more effectually providing for 
the national security and defense and prosecuting the war by estab-_ 
lishing credits in the United States for foreign governments.’” A 


[72] 
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reading of section 2 is convincing that loans and not subsidies were 
intended. The United States is authorized to purchase at part the 
obligations of foreign governments. As to rate of interest and other 
essentials the foreign governments’ obligations are to have the same 
terms and conditions as United States obligations (Liberty Bonds) 
issued under the authority of the Act. Arrangements are to be 
made for purchasing the foreign government obligations and for the 
subsequent payment thereof before maturity. If United States 
bonds are converted into bonds bearing a higher interest rate, the 
obligations of foreign governments are likewise to be converted. In 
section 3 of the same Act, the Secretary of the Treasury is authorized 
to receive on or before maturity payment of the foreign government 
obligations; to sell the obligations at not less than the purchase price, 
and to apply the proceeds of any payments made on account of the 
obligations to the retirement of the debt of the United States. It 
is clear that when the advances were made to our Allies they knew 
and we knew they were loans, not gifts. From the time of the orig- 
inal advances to date no responsible authority in the United States 
Government has suggested cancellation, and each of our debtor 
nations, except Russia, has recognized the debt created by the ad- 
vances and has oifered to pay. The only question for discussion in 
each settlement has been the extent of the capacity of the debtor 
to make payment of an acknowledged liability. 

Your second proposition is that the Allies held the line with men 
until we could deliver an army and, therefore, cash advances made 
during this period by the United States were our contribution to 
the general cause of the war and should be cancelled: I shall not 
dispute with you the exact date when we became an effective force 
on the western front nor as to the time or extent of our service at 
sea. We will assume America as you infer contributed nothing mili- 
tary or naval to the common cause but only gave financial support. 
Even then you will have to admit that advances made to our Allies 
after the Armistice, when the war was over, cannot be considered 
as a contribution pending effective entry into battle or as saving 
American lives. We can eliminate at once, therefore, loans made 
entirely after the Armistice to Finland, Esthonia, Latvia, Lithuania, 
Poland, Czechoslovakia, Hungary, Austria, Armenia and Rumania. 
The Allies to which we did make advances while the war was on are 
England, France, Italy, Belgium, Serbia and Russia. As the figures 


[73] 


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I shall give will show, if we admit your argument is sound, England 
alone is concerned. 

The debt settlements have been negotiated on the basis of the 
capacity of the particular debtor to pay. None could pay its signed 
obligations as called for by their terms. Accordingly, payment of 
the principal had to be extended and the period of 62 years set in the 
British agreement has been followed in all other agreements. If 
the debtor nation paid the United States a rate of interest on the 
postponed installments equivalent to the cost of money to us, we 
would receive in present value payment of the full debt. Since, 
however, such an interest rate is beyond the capacity of any of our 
debtors to pay, the United States has, of necessity, accepted less 
than the full value of the debt to the extent the interest to be re- 
ceived under the settlement is below the cost of money to the United 
States, now about 414%. Looking at the matter from the stand- 
point of the debtor nation, the debtor has received a concession in 
its debt to the extent the interest to be paid by it is below the cost 
of money to the debtor. The obligations taken by us from our 
debtors carry the interest rate of 5% per annum. Since this rate 
is less than most of the debtor nations now have to pay for money, 
the rate of 5% is certainly a fair measure of the real burden put 
upon them by the settlements. 

Let us see what relation the burden of our debt settlements bears 
to our loans after the armistice. In this way we can determine 
accurately our real contribution in money to the joint cause of the 
war. In the case of England, post-armistice advances with interest 
amounted to $660,000,000, and the present value of the entire debt 
settlement is $3,297,000,000. It must be remembered that England 
borrowed a large proportion of its debt to us for purely commercial 
as distinguished from war purposes—to meet its commercial obliga- 
tions maturing in America, to furnish India with silver, to buy food 
to be resold to its civilian population, and to maintain exchange. 
Our loans to England were not so much to provide war supplies as to 
furnish sterling for home and foreign needs and to save England from 
borrowing from its own people. 

France’s after-the-war indebtedness with interest amounts to 
$1,655,000,000. The settlement negotiated by Ambassador Béren- 
ger with the American Debt Funding Commission has a present 
value of $1,681,000,000. 


[74] 


Ame 


247 


Belgium’s post-armistice borrowings with interest were $258,000,- 
ooo, and the present value of the settlement is $192,000,000. In 
addition, Belgium has a share of the German reparations sufficient to 
pay her pre-armistice debt to America. 

With Italy the situation is similar. Its post-armistice indebted- 
ness with interest is $800,000,000, and the present value of its debt 
settlement is $426,000,000. It is the same as regards Serbia. In 
view of these facts, in what respect do you still believe America has 
been unfair to its Allies? 

The statement is made in your letter that the French debt settle- 
ment takes annually about 60 per cent of the German reparation 
payments which France is to receive. I believe you are not correctly 
informed. France, in addition to reparations already received from 
Germany, is to be paid under the Dawes Plan 52 per cent of a maxi- 
mum reached three years from now of 2,500,000,000 gold marks 
($625,000,000) after certain charges, about $300,000,000 annually. 
The maximum annual payment required of France under our settle- 
ment is $125,000,000 reached after the 16th year. I think you will 
find that the reparations receivable from Germany by Belgium, 
France and Italy are more than the payments those nations have 
agreed to make on their indebtedness to both the United States and 
to England. 

I come now to your third proposition: that to preserve our self- 
respect and retain the affection of foreign nations for America we 
must as a charity cancel the debts. A creditor is never popular, but 
a debtor without credit is not in an enviable position. England’s 
prompt and courageous attitude when first of all others it sought a 
settlement of its debt seems to me to have been rewarded in her 
present sound financial position, a rock in the turbulent seas of 
monetary instability now washing over the other allied nations. Are 
you so sure that your policy of cancellation will mean a happier 
future for a world which will only continue to trust those who keep a 
promise once made? 

When cancellation of debts is viewed from the standpoint of the 
United States you fail to recognize that the Debt Commission, the 
President and the Congress act not in their individual capacities 
according to sentiment, but as trustees for those whom they repre- 
sent, the American people. If these foreign debts are cancelled the 
United States is not released from its obligation to pay the very 


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bonds which were sold to our citizens to make the advances to the 
foreign governments. We must collect through taxation from our 
people if our debtors do not pay to us what they can. You call thisa 
“specious reason,’’ but nevertheless, again as a lawyer, you must 
know the duty of a trustee. Were these trustees as certain as you 
seem to be that their cestuz qui trust, the American people, demand a 
cancellation of the debts, it is within the province of popular govern- 
ment to carry out that mandate. But neither generally from the 
people, nor in the press, nor at all from the chosen representatives of 
the people in Congress has come this demand. 

I have, as have you, and every other good citizen, a profound sym- 
pathy for the countries suffering from the after-results of the great 
war which we in America have to a large extent escaped. But I feel 
that a recognition of their external obligations by the European 
nations and an undertaking bravely to meet them within their capac- 
ity as each country has done, is a moral force of great service to 
permanent prosperity in the world. I cannot agree with you that 
England is on the edge of destruction. It is most sound of heart, 
as its recent solution of a general strike has shown to all. Other 
countries are in monetary difficulties, but the very acuteness of the 
disease has brought a clear understanding of the causes and of the 
proper remedies. Dark as the financial sky now appears, I believe 
Europe is today closer to a permanent sound solution of its economic 
troubles than at any time since the war. The danger is there, but 
with it the courage to fight. I do not despair of Europe. 


Very truly yours, 


(Signed) A. W. MELLON, 
Secretary of the Treasury. 
Frederick W. Peabody, Esq., 
Counsellor-at-Law, 
Ashburnham, Massachusetts. 


[76 ] 


249 


STATEMENT OF THE FACULTY OF PRINCETON 
UNIVERSITY 


PREFATORY STATEMENT 


BY PRESIDENT JOHN GRIER HIBBEN 


The signatures of 116 members of the Princeton Faculty constitute 
one more indication, in a lengthening series, that the enlightened 
opinion of the country calls for a revision of the debt settlements 
with our former Allies. However well-intentioned may have been 
the motives of our representatives who approved the terms of these 
settlements, and however lenient these terms may be represented to 
me by those who wish to insist on our generosity, there is a growing 
recognition that the settlements so far effected do not meet the 
actual situation. Even granting the capacity of our debtors to ful- 
fill our stipulations, which are now openly questioned, we do not 
desire to impose tremendous burdens of taxation for the next two 
generations on friendly countries who are struggling to regain their 
strength, at the very time when we are amassing a national fortune. 
To urge our government’s obligation to its citizen bondholders and 
taxpayers is to evade the real issue, which does not concern the rela- 
tion of the government to the people, but our national policy to- 
ward certain other states. To divorce the financial provisions of the 
loans from the moral situation in which they were asked for and given 
is to invent an unreal economic abstraction. Against the conten- 
tion that this question should not be raised until all cur debtors have 
come to book there is a ready rejoinder that it would be wiser to 
adopt a policy which would facilitate agreements with the remaining 
parties and then revise previous settlements. Finally there is good 
reason to believe that in economics, as well asin morals, altruism is 
indistinguishable from true self-interest. 


TEXT OF STATEMENT 


“We, the undersigned, members of the Faculty of Princeton 
University, heartily endorse the desire, expressed by the Faculty 


zea 


250 


of Political Science of Columbia University, for a reconsideration 
of the settlement of the Allied Debts.’ 


President John Grier Hibben 
Theodore Whitefield Hunt 
Herbert Stearns Squier Smith 
Henry Van Dyke 

Walter Read Rankin 
William Berryman Scott 
Andrew Fleming West 
Henry Burchard Fine 
George McLean Harper 
Paul Van Dyke 

William Kelly Prentice 
Christian Gauss 

Edward Capps 

Edwin Grant Conklin 
Luther Pfahler Eisenhart 
William Foster 

Frank Jewett Mather, Jr. 
Frank Albert Fetter 
Joseph Edward Raycroft 
Douglas Larabee Buffum 
Varnum Lansing Collins 
Charles Grosvenor Osgood 
Edward Gleason Spaulding 
Alan Wilfrid Cranbrook Menzies 
Frank Henry Constant 
‘Dana Carlton Munro 
George Harrison Shull 
Warner Fite 

Gordon Hall Gerould 
Robert Kilburn Root 
Charles Carroll Marden 
Edward Cooke Armstrong 
Harold Herman Bender 
Charles Rufus Morey 
Donald Clive Stuart 
Frank Haigh Dixon 


Earl Taylor Compton 
James Thayer Gerould 
Morris William Croll 
Radcliffe Heermance 

John Edwin Pomfret 

Allan Chester Johnson 
Arthur Leslie Wheeler 
Kenneth McKenzie 

Jesse Hickman Bond 
Henry Robinson Shipman 
Charles Ranald MacInnes 
John William Besore 
Francis Charles MacDonald 
George Erle Beggs 

Stanley Edwin Howard 
Walter Phelps Hall 

Robert Scoon 

Joseph Coy Green 

Norman Browne Tooker 
Sherley Warner Morgan 
Walter Scott Hastings 
Solomon Lefschetz 

Frank Dunstone Graham 
Shirley Howard Weber 
Charles William Hendel, Jr. 
Richard Montgomery Field 
Frank Linley Critchlow 
William Koren 

Marcus Stults Farr 

Henry Bartlett Van Hoosen 
Lewis Robinson Cary 
Percy Addison Chapman 
Donald Bucker Sinclair 
John Quincy Stewart 
Frederick Courtney Tarr 

J. Dayton Voorhees 


[78] 


251 


Shelden Jenckes Howe Loyle Alexander Morrison 
Gregg Dougherty Kenneth Porter Stevens 
Walter Lincoln Whitelesey Bateman Edwards 

Robert Greenhalgh Albion Albert Rudolph Elsasser 
Lawrence Francis Hawkins Lowe Stephen Joseph Herben, Jr. 
Robert Ralston Cawley Leslie Thomas Fournier 
Theodore Meyer Greene Elmer Adolph Beller 
Melvin Eugene Bassett Loring Baker Walton 
Raymond James Sontag Donald Wheeler 

Philip Khuri Hitti Francis Adams Comstock 
Allen Brown West Hamilton Cottier 

Henry Lyttleton Savage Rensselaer Wright Lee 
Arthur Norton Cook Georges Bally 

Joseph Epes Brown, Jr. Robert Wallace Elliott, Jr. 
Harris Elliott Kirk George Carr Wright 

James Douglas Brown Willard Thorpe 

Sidney Lawrence Levengood Denver Lindley 

Chester Chisholm Connell Gray Cowan Boyee 

Frank Cudworth Flint William Theodore Richards 
Clarence Dietz Brenner Erling Dorf 


[79] 


252 


LETTER OF SECRETARY MELLON TO DR. JOHN GRIER 
HIBBEN OF PRINCETON UNIVERSITY 


March 15, 1927 
My dear President Hibben: 


Your statement and that signed by 116 members of the Princeton 
University faculty endorsing the statement issued by the faculty of 
political science at Columbia, and urging the reconsideration and 
revision of the debt settlements with our former associates in the 
war, have come to my attention. I recognize, of course, the pro- 
priety of a frank expression of opinion on important public questions 
on the part of those in responsible positions, but I am somewhat 
surprised that before giving the public the benefits of their con- 
clusions neither the gentlemen of the faculty of Columbia University 
nor those of the faculty of Princeton University saw fit to make a 
thorough and first-hand investigation of data available at the 
Treasury or sought by personal interview to ascertain the views of 
the American officials who negotiated the settlements. The training 
of these gentlemen, their standing as economists, historians, and 
teachers of government, would have led me to believe that they would 
have conceived it to be their first duty to present a dispassionate 
analysis of the facts based on original study rather than to submit 
their conclusions unsupported by facts. 

Moreover, it would not have been amiss for you and your asso- 
ciates to have taken into consideration that one of these agreements 
has not been ratified and that the inevitable effect of such a pro- 
nouncement would be to encourage and strengthen the opposition 
in foreign countries to such ratification, an encouragement entirely 
unwarranted by the circumstances in view of the fact that the 
American people, expressing themselves through their chosen repre- 
sentatives in the House of Representatives, have approved of this 
agreement and that the debate, when the measure was before the 
House for consideration, indicated that an overwhelming majority 
of the Representatives were opposed to more lenient terms. It is 
highly probable that such expressions of opinion, far from making 
the adjustment of these outstanding obligations easier, will simply 


[ 80 ] 


253 


increase the difficulties of obtaining a better understanding and a 
ratification of the agreement. 
In this connection I cannot refrain from pointing out in answer to 
the plea urging the re-opening of all debt settlements, that it is not 
so long since that all of our soundest economists claimed and rightly 
claimed that the one prerequisite to the restoration of economic 
prosperity in the world was an early settlement of these debts be- 
tween governments. The adoption of the Dawes Plan, the ratifica- 
tion of the various agreements between governments providing for 
payment of this vast unfunded obligation, have, in the course of the 
last few years, contributed mightily to the progress that has been 
accomplished. Re-opening all of the settlements would, in my 
judgment, be a step backward and not forward and one calculated 
to produce discord and confusion rather than to contribute to the 
economic stability and orderly betterment of world prosperity. 
In your statement you say that to divorce the financial provisions 
of the loans from the moral situation in which they were asked for 
and given is to invent an unreal economic abstraction. By this I 
take it you mean to endorse the argument advanced by the Columbia 
faculty that our war advances to our associates were not at the time 
they were made regarded as business transactions but rather as 
joint contributions to a common cause. Admitting, of course, that 
the Congressional debates indicate clearly that the Congress was 
quite willing to loan this money, even on the assumption that there 
was a considerable element of risk in so far as ultimate recovery was 
concerned, nevertheless the record indicates beyond dispute that these 
were loans and not contributions and though not in form in actual 
effect loans from individual American citizens rather than contribu- 
tions from the Treasury of the United States. The Act providing for 
these loans authorized the United States Government to sell Liberty 
bonds to its own people and to invest the proceeds of the sale in the 
bonds of these foreign governments, the latter bonds to bear the same 
‘interest as the Liberty bonds sold and to have the same maturities. 
What we allowed our associates to do, in effect, was to borrow money 
in our investment market, but since their credit was not as good as 
ours, to borrow on the credit of the United States rather than on 
their own. Looking at the substance rather than the form of the 

transaction, the situation was no different than if they had actually 
‘sold their own bonds in the American market and our government 


[81] 


254 


: 


had endorsed them. Had this course been followed would anyone. 
contend that the sums advanced were intended as contributions to 
a joint enterprise rather than loans expected to be repaid? 

As a corollary to this first proposition it is urged that if these ad- 
vances were not to be considered contributions as an original measure | 
they ought now to be so considered because our associates were not 
fighting their own battle alone but ours as well, and that for some 
months we were unable to put many troops into line. I am not going 
to attempt a discussion of the military contribution made by the 
United States to the winning of the war other than to remark that 
when the crucial period was reached in the Spring and Summer of 
1918 our troops were there. I recognize that there is merit in the 
contention that the associated governments might well have joined 
in pooling their resources in a common cause and that even now an 
argument can be made in favor of writing off debts incurred after 
our entry into the war to the extent that they were incurred for con- 
tributions to a common cause, but, and this is an all-important res- 
ervation, there is merit to such an argument only if the proposed 
adjustment is to be a mutual one and is to be applied to all ona 
strictly equal basis. This factor, however, is one that seems to have 
been completely overlooked by the faculties of Columbia and Prince- 
ton Universities and by other advocates of debt cancellation urging 
the common cause contribution argument. 

Early in the war in order to minimize the dislocation of exchanges 
and for sound economic reasons the general principle was established 
that goods and services purchased by one ally in the country of an- 
other ally should be financed by the latter. That is to say, that if 
France purchased supplies and services in England the British gov- 
ernment would furnish the pounds with which to buy them and, vice 
versa, when Great Britain bought goods and services in France the 
French government would undertake to furnish the francs. As to 
whether in the latter case the francs were furnished on credit or for 
cash I do not know, but in the former case the pounds were furnished 
on credit. When we came into the war we readily agreed to apply 
this sound principle to our transactions with our associates. That 
is to say, we agreed to furnish them the dollars with which all their 
purchases in the United States should be consummated and what is 
more, we agreed to lend them those dollars. This was the origin of 
these debts. But here is the fact that is not mentioned and which 


[ 82 ] ; 
f 


255 


you gentlemen have apparently overlooked. We purchased supplies 
and services from France and the British Empire by hundreds of 
millions. They had to be paid for in francs and in pounds. We did 
not get those francs and pounds on credit—we paid cash for them, 
except possibly in a few comparatively minor instances. In other 
words, we paid cash for the goods and services necessary to enable 
! us to make our joint contribution to the common cause. Our asso- 
| ciates got the goods and services purchased in this country neces- 
sary to enable them to make that part of their joint contribution 
| on credit. Here is the fundamental reason which explains why we 
| ended the war with every one owing us and our owing no one. We 
are now urged to cancel these debts because it is alleged that they 
_ were incurred in a common cause, but neither abroad nor in this 
' country has it been suggested that if this is to be done we are to be 
| reimbursed the dollars actually expended by us in France and Great 
Britain so that the goods and services they sold us might constitute 
their contribution to the common cause. 

| In this connection, one other fact may well be called to your atten- 
| tion. Among the purposes for which we made dollar advances was 
| that of maintaining the franc and the pound at somewhere near their 
| normal values. In other words, we loaned our associates the dollars 
| with which to purchase bills on London and Paris and so permit 
/ them to peg the exchanges. When we were obliged to purchase franes 
_and sterling for our own uses in the Paris and London markets, we 
| did so at the artificial prices maintained by the use of the very funds 
we had loaned. I have no desire to emphasize this point. I mention 
it, together with the situation above described, as factors which had 
to be considered by those charged with the responsibility of nego- 
tiating the settlements on behalf of the American Government, and 
which, with other important ones, could have been readily ascertained 
_ by those undertaking to advise our people had they availed them- 
selves of the opportunity which would have been glady afforded 
them to ascertain all of the facts. 

Before leaving the question of the purposes for which the debts 
were incurred, may I remind you that I have already had occasion 
to point out that the present value of these debt settlements at 5%, 
arate less than most of the debtor nations now have to pay for money, 
is, except in the case of Great Britain, either less than or approxi- 
mately the same as the amounts borrowed after the Armistice. 


[83 ] 


256 


France’s after-war indebtedness with interest amounts to $1,655,000,- 
000; the Mellon-Bérenger settlement has a present value of $1,680,- 
000,000. Belgium’s post-Armistice borrowings with interest were 
$258,000,000, and the present value of the settlement is $192,000,000. 
The post-Armistice indebtedness of Italy with interest is $800,000,- 
000, and the present value of its debt settlement is $426,000,000. 
The principal of Serbia’s post-Armistice indebtedness aggregates 
$16,175,000, and the present value of its debt settlement is $15,919,- 
ooo. The loans to Finland, Esthonia, Latvia, Lithuania, Poland, 
Czechoslovakia, Hungary, Austria, and Rumania were all made 
after the Armistice. 

The Columbia professors criticized capacity to pay as a formula 
difficult, if not impossible, of just application, a criticism I under- 
stand you endorse. But no other formula is suggested. It is obvious 
that in the settlement of these huge debts, the burden of which must 
be borne either by foreign taxpayers or by our own, it was essential 
that the negotiations must be based on some guiding principle if 
justice was to be done between all parties; that is to say, not only as 
between creditor and debtor, but as between debtors. Frankly, I 
know of no fairer formula than that of capacity to pay generously 
applied. To ask a debtor nation to pay substantially less than it is 
able to without undue burden on its people is to do an injustice to 
our own taxpayers; while to ask a foreign debtor to pay more than 
its capacity, is to be guilty of an act of injustice such as I can assure 
you cannot be charged against us. Apparently you would have all 
debtors treated on an equality. Does this mean that the Italian 
settlement should be raised to a point where it will correspond to the 
British, which, of course, would impose a burden impossible of per- 
formance by Italy, or do you propose that the British be reduced to 
50% and the Italian raised to 50%, which would make an easy 
settlement for Great Britain and a still impossible settlement for 
Italy? Or do you propose that the British settlement shall be brought 
down to the Italian 26%, thus imposing no real burden on England 
at all? 

You say that ‘‘We do not desire to impose tremendous burdens of 
taxation for the next two generations on friendly countries.’’ Are 
you quite sure that this is an accurate statement of the facts? In 
estimating the debtor’s capacity to pay without inflicting such a 
sacrifice as would cause a lowering of its standard of living, only inci- 


[ 84] 


257 


dental consideration was given to the reparation payments to be re- 
ceived by the debtor countries from Germany. Now, the fact is 
that all of our principal debtors are already receiving from Germany 
more than enough to pay their debts to the United States; and France 
and Italy, with the exception of this year in the case of the latter, 
are receiving from the same source more than enough to pay their 
debts to Great Britain also. 
_ France, in the year 1926-1927, will receive from Germany approx- 
‘imately $176,000,000. Under the agreements with Great Britain 
and with the United States, France will pay $30,000,000 to us and 
some $71,000,000 to Great Britain, leaving to France a balance of 
$75,000,000. In 1927-1928, that balance will grow to $108,000,000. 
In 1928-1929, in spite of the fact that the payment to Great Britain 
‘rises to $85,000,000, the balance available to France will amount 
| that year to $186,000,000; and, in 1930, after meeting her obligations 
to the United States and to Great Britain, there will be a balance 
from reparation payments of $237,000,000. Italy is paying us this 
‘year $5,000,000 and to Great Britain $19,000,000. They will re- 
“ceive from Germany $22,000,000, which is just $2,000,000 less than 
is necessary to meet their obligations to Great Britain and the United 
States. But, in 1929, German reparations will have risen to $45,000,- 
000, leaving to Italy a balance, after her payments as debtor, of 
$21,000,000. And even in 1936, when her payments to us will a- 
mount to $16,000,000, and to Great Britain approximately $20,000,- 
000, those two amounts will still fall short by $15,000,000 of the sums 
received from Germany. 

Belgium this year will receive from Germany $16,000,000 more 
than she will pay to other countries; in 1927-1928, $18,000,000 more; 
in 1929-1930, $27,000,000 more. Jugo Slavia will receive this year 
11 million dollars more than they will have to pay, and next year 13 
million dollars more. All of the other powers that owe us money will, 
in the aggregate, receive this year $3,000,000 less than they have to 
pay, but by 1929 will be receiving $3,000,000 more than they have 
to pay. 

_ Finally, we come to Great Britain. Under the agreements with 
France, Great Britain will receive from France approximately 
$71,000,000 this year; from Italy approximately $19,000,000; from 
Germany approximately $72,000,000, and will pay us $160,000,000. 
Or, in other words, Great Britain will receive this year from her 


[85 ] 


258 


debtors $2,000,000 more than she pays us. Next year Great Britain 
will receive from France $69,000,000; from Italy, $19,000,000; from 
Germany, $87,000,000; or a total of $175,000,000. Great Britain 
will pay us $160,000,000, leaving a balance of $15,000,000. In 
1928-1929, Great Britain will receive from France $85,000,000; 
from Italy, $19,000,000; from Germany, $127,000,000; or a total 
of $231,000,000. Great Britain will pay us $161,000,000, making a 
credit balance of $70,000,000. It is true that in the past two years 
Great Britain has received about $100,000,000 from Germany, 
France and Italy less than she has paid to the United States, but it 
is equally true that from this year on Great Britain every year will 
receive from her debtors a substantial amount more than she will 
pay to us, so that her American payments will not constitute a drain 
upon her own economic resources. 

It is true that Great Britain has agreed not to accept more from 
her debtors than the sums which when added to reparation payments 
will equal those which she pays the United States. But even taking 
this into consideration, it is obvious that your statement that the 
debt agreements which we have made impose a tremendous burden 
of taxation for the next two generations on friendly countries, is not 
accurate, since the sums paid us will not come from taxation, but 
will be more than met by the payments to be exacted from Germany. 

It must also be obvious that if the amounts to be paid by all our 
debtors are to be reduced and a corresponding reduction is to be made 
in the amount of reparations to be paid by Germany, the net effect 
of this change will be to transfer the burden of reparation payments 
from the shoulders of the German taxpayer to those of the American 
taxpayer. 

Finally, the joint faculties of Columbia and Princeton urge the 
American people to reconsider the debt settlements with allied 
countries ‘‘because of the growing odium with which this country 
is coming to be regarded by our European associates.”’ I doubt wheth- 
er European nations dislike us as much as some people tell us they 
do. But I know this, that if they do, the cancellation of that part 
of their debts which has not already been cancelled will not of itself 
change their dislike into affection. Neither in international relations 
any more than in private life is affection a purchasable commodity, 
while my observation and reading of history lead me to conclude that 


[ 86 ] | 


259 


a nation is hardly likely to deserve and maintain the respect of other 
nations by sacrificing its own just claims. 
_ No one can insure the future; but given normal conditions, it is 
believed a true balance has been held between the duty of the Debt 
‘Commission to the American taxpayer and fairness towards those 
nations to which was extended aid during and after the war. The 
‘debts have not been cancelled, but excessive demands have not been 
‘made. Certainly, the debt settlements cannot become too heavy a 
load in the next few years. In the future, with peace and the devel- 
‘opment of trade internally and externally, it is not too much to 
expect that this will be equally true of the later years also. The 
outstanding fact is that these debts have been settled. A fair trial 
‘can now be had, not on theory, but in practice, and a reopening of the 
whole question at the present time would do more to interrupt the 
‘steady progress achieved since settlement than might be gained from 
any ultimate minor adjustments that can be effected. 

Very sincerely yours, 

A. W. MELLON, 

| Secretary of the Treasury. 
Dr. John Grier Hibben, 
President, Princeton University, 
Princeton, New Jersey. 


4 [87] 


260 


STATEMENT, BY JOHN GRIER HIBBEN, IN REPLY TO 
SECRETARY OF THE TREASURY MELLON’S LETTER 


After consulting with several of my colleagues I wish to make the 
following comment upon the letter of the Secretary of the Treasury 
addressed to me of the date of Mar. 15th, 1927, and appearing in 
the Press of today. 

It is a matter of gratification to us that Mr. Mellon has made this 
statement because it brings the question of foreign debts more forci- 
bly to the thoughtful consideration of the American people. 

The statement coming from 116 members of the Princeton Faculty 
was based upon the general information which the State Department 
had made public for the benefit of the American people and it had 
not occurred to us that there was any essential information concern- 
ing the situation that had not been forthcoming. We felt there was 
no impropriety as American citizens in making a statement of con- 
viction, even though it ran contrary to a decision of Congress. In 
the history of the American people an enlightened public opinion has 
often served to change even the vote of Congress. 

Mr. Mellon’s argument that the burden of paying all debts owed 
to the United States is not a grievous one because it can be paid with 
amounts received each year from German reparations, is not in 
keeping with the statement of policy made by the Debt Commission 
and reported as follows in the New York Times of Sept. 30, 1925: 


“The American Commission has insisted and still remains 
firm in the decision that the payment of German reparations 
to France shall not be linked directly with the Debt Funding 
Agreement. It being held that the German reparation pay- 
ments and the French Wartime Debt to the United States are 
separate problems.” 

Moreover, the request of France that America should take a posi- 
tion towards France similar to that of Great Britain in reference to 
the modification of payments due in the event that the German 
reparations should diminish in amount or fail altogether was refused 
by our Debt Commission. This proposal was called the “Safeguard 
Clause” and was eliminated from the debt settlement proposal 


[88 ] 


261 


between France and the United States at our insistence. Mr. Mel- 
lon’s argument therefore in this respect has validity only so far as 
it assumes that Germany will continue to pay the regular amounts of 
reparation through a period of sixty years. This is an assumption 
of dubious justification. 

According to Mr. Mellon we in the United States are to get the 
benefit of the reparations coming from Germany through our allied 
debtors and designed originally to repair damages of the War. The 
nations which suffered cannot use the reparations for the repair of 
their own destroyed property but must pass it on immediately to 
their ally in the War, the United States. 

There is no doubt that Mr. Mellon is quite correct that these 
debts were not contributions of the United States to their allies, 
but were veritable business transactions, and yet we must not over- 
look the fact that they were made in the midst of the exigencies of 
war, when all of the allied nations were confronted with the serious 
uncertainty concerning the outcome of the conflict, and in the efforts 
to realize the common objective there was certainly a common 
cause. The post-war loans to the allies were made for a common 
cause as truly as the loans which were used in providing powder, 
shot and shell and the general equipment of war. 


JoHN GRIER HIBBEN. 
March 18, 1927. 


[ 89 ] 


262 


REPLY, BY EDWIN R. A. SELIGMAN, TO 
SECRETARY OF THE TREASURY MELLON’S LETTER 


Honorable Andrew W. Mellon, 
Washington. 


My dear Mr. Secretary: 


Your open letter to President Hibben on the debt settlements was 
so temperate and courteous, and recognized so clearly the legitimac 
of a serious discussion of this important question that the signers of 
the Columbia statement of last December, to which you so frequently 
refer, have authorized me to make a few observations. Following 
your example, I am at the same time offering this letter for 
publication. 

I should like to call your attention to what I conceive to be various 
errors of fact and interpretation in your letter. These fall into two 
groups, one affecting the Columbia and Princeton statements, the 
other relating to your own positive contentions on certain economic¢ 
aspects of the question. 

In the first place, when you speak of the loans as investments, 
throughout your entire argument, you pass over in silence those moral 
aspects of the debt situation which formed the principal basis of the 
Columbia and Princeton statements. The question will not b 
finally settled until we reach an adjustment that is morally defensible 
as well as economically sound, but it would be idle for me to attempt 
here to add anything to the analysis of the moral phase of the subject. 
I desire only to point out that your letter fails to meet this issue at all. 

_ You intimate, in the second place, that our statement was based 
upon an inadequate knowledge of the facts. I assure you that we 
are thoroughly familiar with all the facts that have been made publi 
by the Treasury Department. If there is in your files any pertinent 
information of a fundamental character which has not been divulged 
and which we ought to have consulted, the statements thus far issued 
by the Treasury fail to suggest its existence. Has not the time now 
come when any such information should be made public? 

You intimate also that the Columbia statement was calculate 


[90 ] 


G 


263 


_ to imperil the acceptance by France of the debt agreement. It is 
true that when the statement was issued there appeared to be some 
_ basis for this anxiety; but I submit that events have since shown that 
| France was able to balance her budget and to arrest the fall of the 

franc without the aid of that American loan, the desire to secure which 
| was the only strong argument for ratification put forward by any 
_ responsible French statesman. Evidently the Columbia statement 
had no substantial effect on the action of France in reference to 
' ratification. 
I come now to what seems to me the errors involved in your con- 
tentions in the strictly economic field. 
_ First, it is true that American dollars enabled the Allies to peg the 
exchanges; that is, to keep the exchange close to the pre-war levels. 
| This procedure rendered it possible for the Allies to purchase goods in 
the United States without putting an exorbitant strain on their 
| domestic finances. But it is a gross error to say that pegging made 
American purchases in the Allied countries substantially more costly. 
_It was precisely the pegging that kept Allied internal prices from 
“soaring. Without the peg the Allied exchanges would undoubtedly 
have fallen, but Allied prices would have risen roughly to correspond, 
_as shown by the post-war experience when the peg was removed. 
There would, of course, have been some lag in the rise of prices. But 
the resulting decrease in the dollar cost to us of Allied goods and 
services would have fallen far short of offsetting the disastrous con- 
sequences of a collapse of the Allied exchanges. 
_ Second, in estimating the present value and real burden of the 
debts, you continue to take the rate of interest at 5 per cent, and that, 
too, at the very time when the American government is borrowing 
money in this country at 314 per cent or even less. To use the higher 
rate of interest greatly exaggerates the real reduction in the debts 
which this country has granted. It is no answer to say that the 
debtors themselves must still pay 5 per cent on their current borrow- 
ings, since the present values of the debts, in the calculation of 
which the interest rate is here used, are values to the United States, 
not to the debtors. 

Third, you object to criticism of the principle of capacity to pay, 

but you fail to realize its essential weakness as a criterion. It is con- 
ceivable that an entire nation’s capacity to make payments abroad 
‘can be estimated for the present and the immediate future; but it 


[Lor] 


264 


is obviously impossible to make such an estimate, on any fair and 
scientific basis, for so long a period as the next sixty yeats to come 
In point of fact, the use of the ‘‘ principle” cannot denote a just and 
accurate procedure. It can only have been a cloak for bargaining 
and compromise. Moreover, the principle has proved to involve 
a confusion between the idea of maximum limits and the idea of 
minimum limits. 

You interpret capacity to pay in the generous sense of reducing 
payments to what seems to you a just and reasonable extent. The 
French, on the contrary, interpret the term, as found in our debt 
agreements, to mean the maximum that the debtor can possibly be 
forced to pay. To refer objective action to a principle which is open 
to such contradictory interpretations is unfair and misleading. 
Again, you rebuke the Columbia and Princeton groups for failing to 
suggest some other formula than capacity to pay. They have offered 
no rigid percentage basis for calculating the payments, because they 
think no such basis is applicable. Instead, they urge a procedure 
which will take detailed account of the varying origin and nature 
of the debts themselves. The procedure followed by the United 
States treats all debts except that of Belgium as essentially com- 
mercial obligations. 

You advert to the dollars which the United States spent in pur- 
chasing supplies and services for the Allies. Of course we spent a 
great deal of money in Europe, but what we spent ran in terms of 
hundreds of millions, whereas the debts run in terms of billions. 
These are precisely among the considerations, ignored in its publie 
pronouncement by the debt commission, which a revision would 
make it necessary to examine and to take into account. 

The most perplexing errors, however, are found in the manner in 
which you link up the debt payments with German reparations. It 
does not allude to the point so well emphasized by President Hibben 
that you are here completely reversing your former attitude; an 
attitude which, until your recent letter, always disclosed an ada- 
mantine refusal to admit that debts had anything to do with repara- 
tions. This is illustrated by the persistent refusal of the debt com- 
mission to allow the French to insert the ‘‘safeguard clause’’ based 
on reparations, a clause which probably would have ensured the 
acceptance of the Bérenger agreement. I call attention only to the 
following points: | 


[92] 


( 


| 265 
: You assume that reparations will continue to be paid in the ascend- 
ing amounts contemplated in the Dawes plan, and during as long a 
term as sixty-two years, the term fixed in our debt agreements. Of 
this there is of course no guaranty whatever, and indeed much expert 
opinion now regards it as impossible of accomplishment. Should 
the payments from Germany fail to be made in the scheduled amounts 
over sixty-two years, your whole argument on this head breaks down. 

I come next to an error which rankles deep in the hearts of our 
French friends. You assert that the debt payments will not require 

the Allies to undergo great additional burdens of taxation, because 
they will receive from reparations more than they pay to us. You 

entirely overlook the fact that France has already spent on restoring 
the devastated regions all, and more than all, of the sums that on 
any reasonable probability she will ever receive from Germany. 
These prospective receipts are not a free fund or a surplus which can 
: be used to pay the debts due in this country without affecting the 

French taxpayers. They already have been mortgaged to the full. 
‘The same considerations apply in greater or less degree to most of 
_the other Allies. 
_ Finally your entire argument connecting debt payments with rep- 
-arations places the United States in a very ambiguous position. I 
do not believe that the citizens of this country can contemplate 
with easy conscience a situation in which the chief beneficiary of the 
German “reparation” payments will be, not the Allies but the United 
States, which suffered none of the destruction resulting from inva- 
sion. Do we not stultify ourselves by allowing a situation to develop 
in which the moneys paid ®ver to the Allies by Germany, in order to 
repair the devastation of the war, will flow into our coffers, leaving 
the Allied taxpayers to carry virtually the whole burden of Allied 
reconstruction, which the reparations payments were especially 
designed to meet? 

I have not commented on certain other aspects of the situation 
ignored in your letter. They turn in part on the possible unfavorable 
effects of the debt receipts upon economic conditions within the 
United States itself, and if included here would serve to strengthen 
materially the plea for a reconsideration of the entire debt question. 

My purpose in this letter has been merely to call attention to vari- 
ous economic errors which seem to me to obscure a proper understand- 


ing of this vital issue. Beuthiniles anes 


EpwIn R. A. SELIGMAN. 


Columbia University, March 23, 1927. 
| C93] 


266 


FACTS ABOUT THE DEBT 


[Reprinted by permission of the Foreign Policy Association] | 


I. Pre-armistice loans $7,077,000,000 
Post-armistice loans 3,261,000,000 


The total amount loaned to twenty different 
countries between April 6, 1917 and Nov- 
ember I, 1920 was $10,338,000,000 


II. The United States has negotiated debt funding agreement 
with thirteen of the debtor countries as follows: (France has not ye 
ratified the debt agreement). 


BELGIUM FRANCE LATVIA 

CZECHOSLOVAKIA GREAT BRITAIN LITHUANIA 

ESTHONIA HUNGARY POLAND 

FINLAND ITALY RUMANIA 
JUGOSLAVIA 


Six of the nations have not yet entered into funding agreements with 
the United States. These nations are: Armenia, Austria, Greece 
Liberia, Nicaragua,* and Russia. 


One nation, Cuba, has paid the entire amount borrowed. 
III. The total average annual payments the United States is due to 


receive under the debt funding agreements with the thirteen coun 
tries above are as follows: 


First 10 years $233,000,000 
Second Io years 347,000,000 
Third 10 years - 365,000,000 
Fourth 10 years 377,000,000 
Fifth 10 years 393,000,000 
Last 12 years 414,000,000 


IV. The total amounts we have written off or cancelled depend 
upon the interpretation of a ‘‘fair’’ rate of interest. The followin 


* Nicaragua is consistently making payments on its obligations. 


[94] 


267 


table shows the extent of cancellation brought about by the reduc- 
tion of the interest rate below what is usually considered to be a 
“fair” or “‘normal’’ rate—ranging from 3 to 5 per cent. 


Country Cancellation 
at3% at4K% at 5% 
Great Britain 7%" 17% 28% 
| France 32% 52% 58% 
m iltaly 62% - 75% 79% 
Belgium 28% 46% 54% 


| *The average interest rate over the whole period of 62 years is 3.3 er cent in the case 
of Great Britain; therefore upon the basis of a 3 per cent normal interest rate, Great 
Britain has been overcharged. 


NOTE 


_ For an excellent technical analysis, including important statistical 
material, see Information Service, Special Supplement, entitled 
“The United States and the War Debts,’’ Foreign Policy Association, 
18 East 41st Street, New York, March, 1927. 


[95] 


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Pigou, A. C., “‘Burden of War and Future Generations,” The Quar- 
terly Journal of Economics, Vol. XX XIII, Cambridge, February, 
I9Q1Q, pp. 242-255. 

Rathbone, Albert, ‘Making War Loans to the Allies,” Foreign 
Affairs, Vol. III, New York, April, 1925, pp. 371-398. 

Scattergood, H. H., ‘‘Inter-Allied Debts and America’s Opportu- 
nities,” American Federationist, October, 1926, pp. 1177-82. 

Sinclair, J. F., “America and the Debts of Europe,’’ Annals of the 
American Academy of Political and Social Sciences, Vol. Cll, 
Philadelphia, July, 1922, pp. 85-100. 

[ 100 | 


273 


Snowden, Philip, “‘Debt Settlement, the Case for Revision,’ The 
Ailantic Monthly, Vol. CX XXVIII, Boston, September, 1926, 
pp. 400-408. 

Snowden, Philip, ‘“Problem of Inter-Allied Debts,” The World To- 

Day, Vol. XLV, London, February, 1925, pp. 175-183. 

“Summary of the Arguments For and Against the Proposal to Re- 

| vise the Settlements with Europe,’ The New York Times, April 
3, 1927, Section XX, p. 4. 

Tilby, A. W., ‘‘America: Quixote or Shylock?” Nineteenth Cen- 
tury, Vol. C, London, September, 1926, pp. 107-116. 

Trouton, R., ‘‘Cancellation of Inter-Allied Debts,” Economic Jour- 

nal, London, March, 1921, pp. 38-45. 

Van Norman, L. E., ‘““Europe’s Moral and Material Obligations 

| to America,” Current History, New York, December, 1926, 

My pp. 311-21. 

Wadsworth, E., “Inter-Allied Debt Problem and a Stable Mone- 

tary System Abroad,’’ Proceedings of the Academy of Political 
Science, Vol. X, New York, January, 1923, pp. 281-291. 

“War Debt Controversy—Text of Various Documents,”’ Advocate of 

Peace, September-October, 1926, pp. 561-8. 

Banckler, Beecher, ‘‘Questions on the Debt,’ letter in New York 

Times, February 18, 1927. 

Woll, Matthew, “Effect on American Workers of Collecting Allied 

| Debt,” American Academy of Political and Social Sciences. 

Vol. CXXVI, No. 215, July, 1926, pp. 42-45. 


[ ror ] 


LIST OF PUBLICATIONS 


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226. Raw Materials and Their Effect upon International Relations. Articles 
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March, 1927. 

229. Locarno and the Balkans: A Turning Point in History, by James T. 

Shotwell; The Possibility of a Balkan Locarno, by David Mitrany. 
April, 1927. 

230. The Interallied Debts. Statements as to the Desirability of an Early 

Revision of Existing Arrangements. 
May, 1927. : 


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THE LEAGUE OF NATIONS 


THE LEAGUE oF NATIONS AS AN HiIsTORICAL FAcT 
By William E. Rappard 


THE ADMISSION OF GERMANY TO THE LEAGUE OF NATIONS 
AND Its PROBABLE SIGNIFICANCE 


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CONTENTS 


fe Page 
PREMIUM Oca at 3h Ps a hee Ue ga aw a See 


HE LEAGUE OF NATIONS AS AN HistoricaL Fact, by William 
(AE AEUE og setae ONG ake me AE et 


ADMISSION OF GERMANY TO THE LEAGUE OF NATIONS AND 
ITs PROBABLE SIGNIFICANCE, by Caleb Perry Patterson . 33 
SET | ca dh 0 SU Sai ec eR Be Sc <7 


277 


PREFACE 


No one is able to speak with greater authority on the work of the 
League of Nations than Dr. William E. Rappard, formerly and for 
five years, Director of the Mandates Section of the Secretariat and 
at present member of the Permanent Mandates Commission. Dr. 
Rappard discussed the League of Nations as an historical fact in 
| his admirable address before the Geneva Institute of International 
| Relations on August 17, 1926, and has kindly consented to have 
this address published in the document which follows. Professor 
| Caleb Perry Patterson, who was a member of the party of American 
| professors who visited Geneva last summer as guests of the Carnegie 
Endowment and who was present, with that party, at the meeting 
of the Assembly at which Germany was voted into the League, has 
| discussed, in a recent issue of the Southwestern Political and Social 
| Science Quarterly, the development of the League since Dr. Rappard’s 
address was delivered. It has therefore seemed appropriate to include 


' 


' permission. 
: NicHOoLAS Murray BUTLER 
New York, May 2, 1927, 


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279 


THE LEAGUE OF NATIONS AS AN HISTORICAL FACT 


BY WILLIAM E. RAPPARD 


Recteur de |’Université de Genéve 


Before analyzing the League of Nations in its manifold activities, 
in its achievements, and in its failures, in its prescribed tasks and 
in its applied methods, it may be well to consider it synthetically, 
‘as a great historical phenomenon. 

That it is an historical phenomenon of the first magnitude, com- 
parable in importance with, say, the establishment of national 
States in Europe at the close of the Middle Ages, or the spread of 
parliamentary government in the nineteenth century, no one can 
deny. Whether we ask its friends or its foes, whether we question the 
statesmen of Europe or large bodies of the governed throughout 
the whole world, whether we consult the political historian or 
the student of international law, the reply will be the same: for 
‘good or for evil, the League of Nations, as an ideal and as an insti- 
Bicion, has in the course of the last decade, become a factor of 
‘prime significance in human affairs. It has everywhere become a 
subject of political controversy, in the countries which have joined 
‘it, hardly less than in those which remain aloof. It has everywhere 
od the politics of parties and the policies of governments. 
‘It has settled some international disputes which might, without 
its intervention, have remained unsettled, and it has given rise to 
‘other international disputes which would, without its creation, 
never have arisen. Like motor-cars, wireless telephony, aviation, 
prohibition, fluctuating exchanges, Russian bolshevism, Italian 
a? American opulence, and European impecuniosity, but more 
far-reaching in its consequences than at least some of these, the 
‘League of Nations faces the student of contemporary affairs as a 
fact which may be hailed as a triumph and a blessing, deprecated 
‘as a nuisance or a curse, ridiculed as a sham or a fad, but which 
‘cannot be ignored. 

I shall not, on this occasion, seek as a moralist to estimate its 
alue for mankind, but merely as an historian to understand it and 


[9] 


280 


to locate it in the general scheme of human institutions and events. 

For that purpose, I propose to examine it, first as it was intended 
to be by its founders, second, as it actually is, or, at least, would 

appear to be to an independent witness, and, finally, as it seems 

likely to develop according to human probabilities. 


THE LEAGUE OF NATIONS AS IT WAS MEANT TO BE 


#t is customary to say that the League of Nations was born of 
the World War, or that it is a child of public opinion. Both state- 
ments are as true as they are incomplete. The war itself—that is 
guns, submarines, poisoned gases, and other technical devices in 
the hands of soldiers and sailors—wrought nothing but destruction. 

Public opinion, that uncrowned and anonymous royalty, may 
imperiously impose or decisively oppose any change. It can act, 
however, only through the instrumentality of its ministers, the in- 
dividual poets, artists, scientists, and statesmen of the world. j 

Of the countless spokesmen of public opinion during the war, 
none was more eloquent nor more effective than Woodrow Wilson. 
Many others in high places had before him advocated the creation 
of a league of nations, and not a few had given the subject more 
constant and more penetrating thought. No one as influential, 
however, had been as insistent in the matter, and no one as insistent, 
as influential. Posterity will therefore doubtless vindicate the judg- 
ment of my fellow-citizens of Geneva who dedicated the Memorial 
tablet which decorates, if it does not adorn, the somewhat unseemly 
cradle of the institution, to Woodrow Wilson: ‘“‘Fondateur de lay 
Société des Nations.” " 

The future biographer of the present incumbent of the American 
presidency may suffer from certain perplexities quite unknown to 
the historian of the Wilsonian age. There is no difficulty whatever| 
about ascertaining what, according to Wilson’s hopes and expecta- 
tions, the League of Nations was in the main intended to be and to 
do. His public utterances and his now published written statemen 
on the subject are numerous, and we have every reason to believe 
that they were as explicit as the nature of his thought—or should 
we say of his vision?—permitted. ‘ 

Before the war, Wilson warmly welcomed the ‘many happy 
manifestations . . . of a growing cordiality and sense of | 
community of interest among the nations,’’ and “their willingness 


[10 ] ; 


281 


to bind themselves by solemn treaty to the processes of frankness 
and fair concession.” He firmly believed in international coopera- 
tion, arbitration, and publicity and actively promoted their prog- 
ress. His famous Peace Proposal of the spring of 1913, which 
gave rise to what is known in Europe as the Bryan treaties, con- 
tained no provisions for international sanctions of any kind, nor 
even for arbitration in the narrowly technical sense of the term. It 
was based solely on the idea that the peaceful settlement of all 
‘disputes between the signatory powers might be secured by means 
of impartial investigation, aided by the pacifying influence of public 
Opinion. 

Shortly afterwards President Wilson went a step further in the 
direction of international, or, at least, of Pan-American solidarity. 
The draft treaty discussed in Washington from 1914 to 1916 with 
representatives of the Latin American world provided that ‘the 
High Contracting Parties to this solemn covenant and agreement, 
hereby join one another in a common and mutual guarantee of ter- 
Titorial integrity and of political independence under republican 
forms of governments.’ Although the guarantee thus suggested 
‘was not expressly defined, it, of course, implied the possible use of 
force. This was the less surprising as the United States never dis- 
claimed it as a legitimate method—unilateral it is true—of upholding 
the traditional Monroe Doctrine. 

If I recall these early manifestations of Wilson’s international 
philosophy, it is because they have a direct bearing upon his later 
policies. What he set about to accomplish for the whole world from 
‘1917 onward was, as he once told me in private conversation, noth- 
pee else than what he had unsuccessfully attempted to do for the 
‘American continent in the preceding years. That is why for him, 
[the essential function of the League of Nations was to maintain 
peace by a mutual guarantee of territorial integrity and political 
independence. That is why also Article 10 of the Covenant, in 
lwhich this guarantee is formulated and prescribed, remained to 
e end, the most vital feature of the whole document in the eyes 
fof Wilson, who was its real author. 

Interesting as it would be both from the psychological and from 
e political standpoint, this is not the place to trace the evolution of 
| Vilson’ s conception of the League of Nations, from his first state- 


m2 Ist annual message to Congress delivered on December 2nd, 1913. 
2 Moore, J. B., The Principles of American Diplomacy, New York, 1918, p. 406 et seq. 


Cir] 


| 


282 


ments made before the League to Enforce Peace at Washington o 
May 27, 1916, through his various war notes, messages, and speeches, 
up to his final approval of the Covenant in 1919. The general out: 
line of his views on the subject may be very briefly summarized 
follows: 


The World War must end in a lasting peace. It must give rise te 
‘‘some definite concert of power which will make it virtually im: 
possible that any such catastrophe should ever overwhelm us 
again.”” Peace, in order to be secure, must be guaranteed by moré 
than ‘‘mere agreements.’”’ ‘It will be absolutely necessary,” Wil 
son declared in his address to the United States Senate, as early 
as January 22, 1917, ‘‘that a force be created as a guarantor of the 
permanency of the settlement so much greater than the force 
any nation now engaged or any alliance hitherto formed or pro: 
jected, that no nation, no probable combination of nations coule 
face or withstand it. If the peace presently to be made is to endure 
it must be a peace made secure by the organized major forces 0 
mankind.” ; 

But only a just peace “is worth guaranteeing” by a league : 
nations. What isa just peace? It is one that “plays no favorite 
and knows no standard but the equal rights of the several peopl 
concerned,” ‘‘no matter whose interest is crossed.’’ A just Coal 
one by which the issues of the war are settled “‘definitely and one 
for all and with a full and unequivocal acceptance of the principl 
that the interest of the weakest is as sacred as the interest of thi 
strongest.’ Furthermore, a just peace is one that respects ‘‘nationa 
aspirations” and “self-determination,” that ‘imperative principl 
of action which statesmen will henceforth ignore at their peril.” 
A just peace also is one that cannot give rise to undeserved hardshig 
and thereby to just resentment. Therefore it should provide fo 
“the removal, so far as possible, of all economic barriers and the 
establishment of an equality of trade conditions.’’® 

If such a peace is publicly made and collectively guarantee 
“by a League of Nations formed under covenants that will bt 
efficacious,”’” nothing should prevent national armaments from 
being ‘‘reduced to the lowest points consistent with domestit 

3Fourth Liberty Loan Address of September 27, 19109. 

4 Address to Congress of February 11, 1918. 


5 Fourteen Points Speech of January 8, 1918. [See International Conciliation, No. 123) 
Pp. 59-62.] 
Bee 


3 283 
safety.” Indeed the constitution of such a league should be an 
essential part of the peace settlement itself. 

Such were the main elements of the peace programme which 
Wilson brought to Paris in December 1918. Its importance was 
all the greater as it had in principle been agreed to by all the bellig- 
erents as the basis upon which the final settlement was to be made. 
It should be noted that although quite naturally and even neces- 
sarily vague, it was none the less sufficiently defined to show that in 
Wilson’s mind the League was not primarily conceived of as an 
organ of conciliation or arbitration, and not at all as a medium of 
‘peaceful cooperation. It was essentially the instrumentality through 
which a just peace should be permanently guaranteed by the con- 
‘certed will and power of its member states. 
_ Before ascertaining in how far the Covenant conformed to this 
'programme, let us briefly consider the views and expectations of 
a few of those statesmen who share with President Wilson the 
‘honor and the responsibility of the paternity of the League of Nations. 

Ever since 1914 the idea of some international organization for 
the prevention of future wars had been freely discussed in Great 
Britain and advocated in Parliament with peculiar force by Mr. 
Asquith as Prime Minister and Sir Edward Grey as Foreign Secre- 
tary. As both of these liberal ministers resigned in 1916, and as 
they took no personal part in the peace settlement, their views can 
have had but an indirect influence on the framing of the Covenant. 
The British statesman who from 1916 onward was most active 
in favor of the establishment of a league was undoubtedly Lord 
Robert Cecil. As a member of Mr. Lloyd George’s coalition minis- 
try, he succeeded in obtaining the appointment of a Committee to 
prepare the draft Covenant and closely followed its labors. In 
1919 he represented the British government on the League of Na- 
ions Commission. Shortly before the Armistice, he prepared a 
h on World Opinion and the League of Nations, which he 
elivered before the University of Birmingham on November 12, 1918. 
When we compare the conception of the League outlined in this 
h with that of President Wilson, we cannot fail to note several 
appreciable differences. 
For both statesmen, of course, the League was destined to prevent 
, and both held that it should be established by the Peace Con- 
ence. Both hoped that it might promote disarmament, although 


C13] 


284 


Cecil’s views were rather pessimistic on this point, and both insisted 
on the pacifying virtues of open diplomacy and public opinion. 
But, whereas, for the American president, the League was essen- 
tially to guarantee, if necessary by military force, a just territorial 
settlement based on the principle of self-determination, for the 
British blockade minister, it was to forestall conflicts between na- 
tions by compelling them to resort to a peaceful procedure of con- 
ference, discussion, and delay in restraint of war. Whereas Wilson 
had deliberately disregarded the technical proposals of the Ameri- 
can League to Enforce Peace, and displayed an utter lack of in- 
terest in what he rather contemptuously called ‘its faith in machin- 
ery,” Cecil showed a corresponding distrust of ‘‘simple formulae” 
and of ‘‘any ambitious scheme” which inevitably made “‘a large in- 
vasion of national sovereignty.’’ He was very sceptical about the 
possibility of submitting vital international questions to the _ 
ment of courts of law and ‘‘confessed to the gravest doubts” 
to the practicability of enforcing the decrees of such courts by any 
“form of international force.’”’ On the other hand, he firmly be- 
lieved in the efficacy of economic pressure as a means of coercing 
a country bent on aggression in violation of its pacific agreements. 
Lord Robert Cecil's main conception of a league of nations, 
neither too indifferent to the susceptibilities of national sovereignty 
to be acceptable, nor too mindful of them to be effective, is well 
summed up in the following lines: : 


The most important step we can now take is to devise ma- 
chinery which, in case of international dispute, will, at the | 
least, delay the outbreak of war, and secure full and open dis- | 
cussion of the causes of the quarrel. For that purpose 
all that would be necessary would be a treaty binding the sig- | 
natories never to wage war themselves or permit others to 
wage war till a formal conference of nations had been held to 
enquire into and, if possible, decide upon the dispute. It is 
probably true, at least in theory, that decisions would be © 
difficult to obtain, for the decisions of such a conference, like 
all other international proceedings, would have to be unani- i 
mous to be binding. But since the important thing is to secure 
delay and open discussion, that is to say, time to enable public | 
opinion to act and information to instruct it, this is not a — 
serious objection to the proposal. Indeed, from one point of — 


[14] 


ee ee 


285 


view, it is an advantage, since it avoids any interference with 
national sovereignty except the interposition of a delay in 
seeking redress by force of arms. That is the essential thing, 
and to secure it, the treaty would require each of the signa- 
tories to use their whole force, economical as well as military, 
against any nation that forced on war before a conference had 
been held. To that extent, and to that extent only, interna- 
tional coercion would be necessary. 


Besides advocating such limited measures to prevent the out- 
_ break of war, Lord Robert Cecil, in his speech also briefly alluded 
to various forms of international cooperation such as the revision of 
obsolete treaties, control of backward races and certain social actiy- 
ities, which the League of Nations should promote to remove the 
causes of war. Thus, Lord Robert Cecil added to the Wilsonian 
conception of a league to guarantee peace, which he at bottom did 
not share himself, the idea of a league to prevent war by interna- 
tional conference and cooperation. 

The third author of the Covenant whose name must be mentioned 
_ here, in view of the importance of his contribution, is General Smuts. 
His great influence was due to his personal qualities more still than 
to his official position. Endowed both with an acute legal mind and 
a vivid political imagination—a very rare combination—this former 
Boer soldier was Lieutenant-General in the British forces and a 
member of the Government of the Union of South Africa. Having 
gained the confident friendship of several of his leading British 
colleagues at the Peace Conference, as well as that of President 
Wilson, he became the second British representative on the League 
of Nations Commission. 

Just before the opening of the peace negotiations at Paris, he 
published a remarkable booklet® in which he expounded a concep- 
_ tion of the League, as novel as it was ambitious. ‘My reflections,” 
he wrote in his foreword, “(have convinced me that the ordinary 
conception of the League of Nations is not a fruitful one nor is it the 
right one, and that a radical transformation of it is necessary. If 
‘the League is ever to be a success, it will have to occupy a much 
‘greater position and perform many other functions besides those 
ordinarily assigned to it. Peace and war are resultants of many 
6 General Smuts, The League of Nations, A Practical Suggestion, London, 1918. 


[15] 


286 : 
complex forces, and those forces will have to be gripped at an earlier 
stage of their growth if peace is to be effectively maintained.” 

Besides the immediate prevention of war and the promotion of 
international cooperation, notably in the economic field, the League, 
according to Smuts, was to assume great burdens of government. 
The war had overthrown the four great empires of Europe, Ger- 
many, Austria-Hungary, Russia,and Turkey. It had set free many 
peoples to whom self-determination had been promised. Not all 
of these peoples were as yet capable of ruling themselves, but the 
pledges given by the Allies, as well as wise foresight, forbade the 
annexation of their territories. Surely then, Smuts remarked, 
“the only statesmanlike course is to make the League of Nations 
the reversionary, in the broadest sense, of these empires. In this 
debacle of the old Europe, the League of Nations is no longer an 
outsider or stranger, but the natural master of the house.’’? 

The European estate to which the League was to be the heir, 
should be administered either directly by its new master, or on his 
behalf, by certain so-called mandatory States. “It is not improba- 
ble,” Smuts added,® ‘‘that the supervision of the European States 
will impose the heaviest task of all on the League of Nations, at any 
rate for this generation. But it will have to be performed efficiently, 
as there is little doubt that the old historic feuds surviving among 
the European nationalities may easily become a fruitful source of 
war danger. If the League is ever to be a reality, it will have to 
succeed in this great task. And it will succeed if it takes itself 
seriously and looks upon itself not as a merely nominal, but as a) 
real, live active heir to the former Empires, and is determined to 
discharge the duties of the great beneficent position which has 
devolved upon it as supreme guardian of the peace interests of 
humanity.” 

As to the functions of the League as a maintainer of peace, Smuts| 
closely followed the views of Cecil. He displayed, however, a greater 
faith in arbitration, which he wished to see rendered compulsory 
in all juridical disputes, and he was more insistent than his imperial 
colleague on the obligations of national disarmament. 

The Covenant, as it was finally signed, contains little that is no 
at least foreshadowed in the utterances of the three statesmen to 
whom allusion has just been made. It is, in fact, essentially anc 


7Smuts, Fhe League of Nations, A Practical Suggestion, p. 11. 
8 Ibid., p. 26. 
[ 16 ] 


287 


almost exclusively the product of British-American political ex- 

perience and practical idealism. 

Even within the limited space at our disposal, we must however 
recall at least the name of Léon Bourgeois, the leading French 
exponent of the League of Nations. Although unlike Wilson, Cecil, 
and Smuts, the venerable French statesman had devoted a large 
part of his life to the elaboration and propagation of the doctrines 
of international organization, and had in 1910 already published a 
book under the title of ‘‘ Pour la Société des Nations,” his effective 
influence at the Peace Conference was very slight. The country he 

represented having born the brunt of the war, was, in I919, more in- 
terested in matters of security, territorial readjustments, and econom- 
ic reparations than in the establishment of a League of Nations. 
_ Besides, its Prime Minister, the “‘ Tiger’’ Clemenceau was notoriously 
sceptical about the possibilities of establishing peace on a per- 
manent basis and openly hostile to any schemes which might tend 
to deprive France of the spoils of her hard-won victory, and of the 
‘advantages of her momentary military superiority. Furthermore, 
even Bourgeois himself, whose political philosophy was far less 
cynical than that of his chief, shared with the great majority of his 
countrymen what we may call the punitive, as opposed to the Wil- 
‘sonian impartial conception of peace. 

At the end of 1916, he had declared that the League could only 
be founded after the establishment of a victorious peace.’ After 
Wilson’s Mount Vernon address of July 4, 1919, he gave out an 
Minterview advocating the immediate foundation of the League 
among the allied powers.” Both views, contradictory as they were, 
pointed in the same direction, a direction totally different from that 
envisaged by Wilson, Cecil, and Smuts. The League, according 
to the French conception, was either to serve as a sword to hasten 
on the day of victory or asa shield to protect its fruits. On the eve 
‘of the Armistice, Léon Bourgeois presided over a gathering at which 
the French League of Nations Union was founded. In his presiden- 
tial address, he declared: ‘‘Voici que l’heure des libérations, des 
réparations, des restitutions a sonné. Et voici également que vient 
Vheure des chatiments.’’! 

9 Léon Bourgeois, Le Pacte de la Société des Nations, Paris, 1919. 2eme mille, p. 13. 
10 [bid., p. 52. 


u Association Francaise pour la Société des Nations. Discours prononcé a 1’Assemblée 
érale canstitutive du 10 novembre 1918, par M. Léon Bourgeois, Paris, 1918, p. 4. 


enya 


— 


288 
£ 


While warning his audience against the frailty of territorial guar- 
antees, he went on to say: ‘‘We do not deny that such guarantees 
are necessary. Justice itself demands the punishment of the culprit.’”” 

The League, as he saw it, was to be founded by the Allies alone. 
Those neutrals, whose ‘policy had been deemed acceptable during 
the war, were then to be admitted. As for Germany, her day might 
come later, when she could give evidence of sincere penitence. 
““The League of Nations,”’ he declared, "tends towards universality, 
but in order to attain its very purpose, it can include only free 
peoples who have proved faithful to their given word, who have 
observed all the obligations to which their past faults may have 
committed them, who, in a word, offer all the necessary actual and 
legal guarantees.”’ 

aus such peoples, an international institution should be se 
up by “‘a contract of mutual assurance against the risk of — 
This institution, in whose favor no signatory State should ee 


lutely abandon its sovereignty, was, however, to be endowed with 
the authority of laying down the law in case of disputes and o 
enforcing its decisions by means of diplomatic, economic, and mili- 
tary sanctions. For that purpose, an international force was to be 
organized ‘‘which would be able to overcome all opposition, un- 
justified and henceforth criminal, on the part of any covenant- 
breaking State.’ é 
The neutral powers, although they cannot, in any true sense, be 
considered as co-authors of the Covenant, were offered an oppor- 
tunity of presenting their views about it before its final adoptio 
They were unanimous in favor of immediate universality, and with 
one accord insisted on the necessity of developing, in a spirit of 
absolute impartiality, the conciliatory and judicial functions of the 
League. The reticence on the subject of sanctions, which they also 
displayed, sprang from their obvious misgivings about the possi- 
bility of enforcing League decisions on recalcitrant nations, in the 
present state of international solidarity. 
Such, very succintly summarized, were the main wishes, hopes, 
and expectations of those chiefly concerned with the foundation 
12 Tbid., p. 
13 Acnetintion Francaise pour la Société des Nations. Discours prononcé a 1’Assem- 
STD constitutive du 10 novembre 1918, par M. Léon Bourgeois, Paris, ror8, 
"14 Tbid., 


15 Beeceaad Francaise pour la S. d. N. Discours prononcé A l’Assemblée général 
constitutive du 10 novembre 1918, par M. Léon Bourgeois, Paris, 1918, p. 14. 


[18 ] 


289 


of the League of Nations at the beginning of 1919. After prolonged 
discussions and many mutual concessions, these various views 
were embodied in the Covenant. In perusing its 26 Articles it is not 
difficult to discover the various sources of its inspiration. As a 
whole, the Covenant may be regarded as the charter of the League 
of Nations, such as it was intended to be by those who created it. 


THE LEAGUE OF NATIONS AS IT ACTUALLY IS 


Turning now to the League as it actually is, after six and a half 
years of legal existence, let us see what has become of the various 
conceptions from which it sprang. 
The Wilsonian idea of a League for a mutual guarantee of the 
territorial integrity and political independence of its members is 
expressed in Article 10 of the Covenant. What, in political reality, 
_ survives of it today? 

Although the provisions of this Article have never been clearly 
violated since the birth of the League, they have been the object 
of so much hostile comment, not only in the United States but also 
|at the various Assemblies of the League, that faith in its efficacy 
has been very severely shaken. As I have shown elsewhere,1* the 
value attached to Article 10 by the different nations of the League 
stands in direct ratio to the protection they expect from it, and in 
‘inverse ratio to the undesirable obligations which it may impose 
‘upon them. Whereas, for a State in the position of Poland, Article 
/I0 is ‘‘one of the corner stones on which the whole organization of 
the League rests,” it is looked upon as an unmitigated evil in coun- 
‘tries situated as Canada. 

It must be said that the Wilsonian conception of the League and 
Article 10, which is its most faithful expression, have not been 
given a fair chance in the contemporary world. A mutual guaran- 
tee of territorial integrity is conceivable as an effective safeguard 
against war only under two conditions, neither of which are ful- 
filled today. 

The first of these conditions, which Wilson himself repeatedly 
Stressed, is that the frontiers to be guaranteed be just frontiers, 
and that they be universally, or, at least, generally recognised as 
such. Although the Peace Treaties of 1919 are sometimes criticised 
with undue severity and with insufficient regard for the difficulties 


16 W. E. Rappard, International Relations as Viewed from Geneva, New Haven, 1925, 
). 129 ef seg., and 171 et seg. 
[19] 


290 


under which they were negotiated, it is still not easy to understand 
why Wilson, on his return from Paris, could expect the world to 
share the enthusiasm with which, in his last speeches, he professed 
to consider them. It is certainly impossible to reconcile not a few 
of their more important provisions with the principle of impartiali- 
ty towards great and small States, victors and vanquished, and with 
the doctrine of self-determination, which he had done so much to 
establish in the eyes of the present generation as being the essence 
of international justice. 

The other condition under which alone a mutual guarantee of 
territorial integrity could prove effective and workable is that a 
practicable method be adopted for the peaceful modification of 
frontiers according to changing national, racial, and demographic 
conditions. In Wilson’s third draft of the Covenant, a method was 
suggested by means of which the dangerously rigid principle of 
guaranteed territorial integrity might have been rendered some- 
what more flexible. But that suggestion was not embodied in the 
Covenant. All that remains of it are the provisions of Article 19 
which provides for “‘the reconsideration by Members of the League 
of treaties which have become inapplicable and the consideration of 
international conditions whose continuance might endanger the 
peace of the world.’”’ Lord Robert Cecil's proposals concerning the 
pacific settlement of international disputes, the procedure of delay | 
and discussion in restraint of war, and economic and military sanc- 
tions were adopted almost without change and have been embodied | 
in Articles 15 and 16 of the Covenant. Although they also have never 
been violated, except perhaps in the case of Corfu, it would be rash] 
to maintain that they were really and completely in force today. The 
emollient interpretation which several clauses of these Articles have 
received, notably at the hands of the Assembly of 1921, appreciably 
weaken the protection which they might have afforded. In con- 
sequence, efforts have been continuously made to reenforce their} 
provisions. But these efforts, which led to the draft treaty of mutual 
guarantee in 1923, to the famous Protocol in 1924, and indirectly even| 
to the Locarno agreements in 1925, have not yet been crowned with 
success. | 

Here also various unfavorable conditions have impeded prog+ 
ress and indeed forced back the lines of defence against war which 
had been established in the Covenant. The most unfortunate ©} 
these conditions has undoubtedly been the lack of universality o 


[20 ] 


291 


the League. It is quite obvious that as long as several of the largest 
and most powerful States of the world hold aloof, the economic 
blockade, as a weapon in the hands of the League, can deter no 
would-be aggressor from his evil designs nor therefore reassure 
his threatened victims. Lord Robert Cecil had in consequence very 
consistently urged in his Birmingham address that membership in 
the League should not only not be withheld from the defeated 
States, but should, in fact, be imposed upon them. 

On the other hand, the League as a medium of international 
conference, conciliation, and cooperation has more than fulfilled 
the expectations of those who, before its birth, shared Lord Robert 
Cecil’s hopes on this score. As we shall see, it is in the fields of 
uncontentious or only semi-contentious action that the progress 
of the League has been most rapid and its contribution to peace 
most striking. 

The modifications undergone by the main proposals of General 
Smuts offer a curious example of the uncertain destiny of ideas 
when thrown into the melting pot of international legislation. The 


_ South African statesman had devised his scheme of government by 


mandate as a method by which the League might assure the ad- 
ministration of those of the inhabitants of the former empires of 


Europe who were not yet able to stand-by themselves. He had 
_ expressly excluded from its scope the “‘barbarian’’ natives of the 
' former German colonies who, he had declared, should be dealt with 


in accordance with the fifth of President Wilson’s fourteen points. 
When Wilson learned of the mandate idea, he was so much struck 


| by its possibilities that, in the Supplementary Agreements which he 


added to his second draft, circulated on January 10, 1919, he pro- 
vided for its application, not only to the “peoples and territories 


which formerly belonged to Austria Hungary and to Turkey,” 


but also to ‘‘the colonies formerly under the dominion of the German 
Empire.” In the Hurst-Miller draft of the Covenant, the system 
was restricted to ‘‘territories which formerly belonged to the Ger- 


-man Empire and to Turkey.” In the text finally adopted by the 


Peace Conference, the words “‘colonies and’’ were placed before 
“territories.’’!7 Thus the scheme was applied to peoples for whom 


It is curious to note in this connection that General Bliss, who obviously had great 
Misgivings about the plan, wrote to President Wilson in his memorandum of January 14, 


“r919: “It would seem desirable to avoid phraseology that would give color to the idea 
‘that the proposed League of Nations has for one of its principal objects the control of 
Situations growing out of the present war . . . The sole object of the proposition 
of General Smuts is to bring the United States into line with Great Britain in exercising 


supervisory control over certain areas of the earth.” Cf. Baker, R. S., Woodrow Wilson 
and the World Settlement, London, 1923, vol. 3, DD. II4-1I15. 


[21] 


292 


it had not been intended by its originator and not applied to those 
for whom it had been primarily devised. 

If on this special point therefore the intentions of General Smuts 
were thwarted, on the other hand his main conception of the rela- 
tions between the League and the peace settlement proved true, 
more so perhaps even than was realized when the Covenant was 
finally drafted. Barring Article 22, which deals with the former 
German colonies and the former Arab provinces of Turkey, the 
Covenant itself contains no mention of other territorial problems 
arising out of the peace settlement. By other international agree- 
ments, however,—peace treaties, minority treaties, decisions of the 
Supreme Council—the League has been saddled with many im- 
portant and irksome duties, quite foreign to its main purposes, as 
first defined by Wilson and Cecil. 

The influence of Léon Bourgeois on the drafting of the Covenant, 
was, as we have remarked above, very slight. His position on the 
League of Nations Commission of the Peace Conference was unfor- 
tunate and paradoxical. On the one hand, whereas his American 
and British colleagues who led the debate in their language which 
he did not understand, had only been attracted by the idea of the 
League through the war, Bourgeois had for a score of years heartily 
supported it. Furthermore, he was since 1917 chairman of an 
official French Commission, which had worked out a draft much 
more liberal and democratic in its inspiration and much more dras- | 
tic in its ambitious pacifism than was the British-American proposal | 
on which the discussion was based. On the other hand, however, 
everyone knew that his government was not fully behind him and 
his draft and that his chief, M. Clemenceau, believed in material 
security much more than in legal principles of international organ- 
ization. Besides, Bourgeois himself, being imbued by what we have 
termed the punitive conception of the peace settlement, was led | 
to defend views which were at bottom inconsistent with the polit-| 
ical philosophy underlying his draft. | 

The result of this ambiguous position was sterility. While only | 
feebly arguing in favour of a more democratic and juridical form 
of the League organization, of the absolute prohibition of war, and | 
of compulsory arbitration, which were provided for under the French 
draft, but probably not prescribed by his official instructions, Bour- 
geois in fact insisted only on the exclusion of Germany, on the 


[22] 


293 


ot eh Se 


choice of Brussels instead of Geneva as seat of the League, and 
above all on the importance of military sanctions and the necessity 
of establishing an international general staff. He was fully suc- 
cessful only in limiting the membership of the League to allied and 
neutral powers, not a particularly constructive achievement nor 
a very happy one as subsequent developments have shown. 

As for the influence of the neutrals, it was no more or even less 
effective. It may have tended somewhat to strengthen the hands 
of the friends of arbitration among the allied representatives and to 
improve the wording of the provisions of the Covenant dealing 
with the admission of new members. 

Having thus very hastily sketched how the Covenant came to be 
drafted as it was in 1919, and how many of its clauses, deemed essen- 
tial by their authors have since proved inapplicable, let us see what 
_the League actually is, as we have it before us today. 

. That it is not at all what the majority of its founders intended 
‘it to be needs no further demonstration. It does not effectively 
guarantee the territorial integrity and political independence of its 
“members. It does not effectively expose any aggressor to the dan- 
‘gers of automatic economic and military sanctions. It has not as 
yet effectively promoted disarmament. It has not made arbitra- 
tion compulsory nor established international relations on the 
foundations of justice, that is of impartiality as between great and 
small, victorious and defeated nations. Nor has the League suc- 
ceeded to the sovereignty over*territories of the former European 
‘empires. Having thus failed to realize the expectations of its found- 
ers in all these important respects, must it therefore be held to have 
| actually failed in the realization if its ultimate aims? Nothing 
would seem less justified than such a pessimistic conclusion. 

_ The League of Nations, as a whole, is but the response to the 
needs of a war-sick humanity whose various national elements have 
become more and more conscious of their essential interdependence. 
'Gropingly they have set up an international institution for the dis- 
/cussion of their common interests, the chief of which is peace. This 
‘in stitution, like most other constitutional creations of history, has 
mot developed along the lines of its fundamental charter, but has 
nevertheless tended by other, rather simpler processes towards 
its natural goal, the pacific organization of international relations. 
_ If we seek to dissect its organism and to analyse its various activ- 


[23] 


294 


ities, we will, I believe, discover that it is in reality composed of 
three leagues, different from one another not only in their immediate 
functions, but also in their membership, their structure, and even 
in their spirit. As I attempted to show with more detail in my last 
year’s Williamstown lectures, we may distinguish a League to 
execute the peace treaties, a League to promote international coop- 
eration, and a League to outlaw war, as I termed itin America. Per- 
haps in Geneva, it might be wiser to call the last institution a League 
to attempt to do away with war. 

The League to execute the peace treaties is practically confined 
to the States represented on the Council. It deals with problems 
such as those of the mandated territories, minority populations, 
the Saar Basin and Danzig, which are not, or at least did not, in 
1919, appear to be susceptible of purely national solutions. No 
unbiassed observer could maintain that the Council had always 
treated these and similar questions in a spirit of complete judicial 
impartiality. Nor could he deny that the League’s action, such 
as it has been, had on the whole inured to the benefit of the popula- 
tions concerned, rather than the contrary. Doubtless it might have 
been wiser to deal more generously and more fairly with the van-— 
quished of the war in various questions of territorial adjustment. | 
Doubtless also it might have been better for the League, as well 
as for the pacification of the world, if the Council had, in the years” 
following the war, shown that it was ‘playing no favorites”’ in the 
execution of the peace treaties. But given the state of mind which 
prevailed at Paris in the Spring of 1919 and which Wilson did a 
much to combat, but still not enough to counteract completely, it , 
is certain that the League has tended to attenuate and not to aggra- | 
vate its consequences. 

Whereas the members of the League to execute the peace treaties | 
are appreciably less numerous than the States which have adhered | 
to the Covenant, the League to promote international cooperation | 
in fact comprises the whole civilized world. When, for instance, as 
is more and more generally the case, the United States and Germany 
participate in the activities of this League in the fields of economics, | 
finance, social legislation, public health, and public morals, thea 
influence is potentially, if not always effectively, as Spree as 
that of the other great powers and certainly more so than that of 
the lesser signatories to the Covenant. 1 


[24 ] 


| 
i 


| 


-29 


The development and the success of the League to promote inter- 
national cooperation have been the great revelation of the last years. 
They do not seem to have been fully foreseen by the authors of the 
Covenant, except possibly by Lord Robert Cecil. The experience 
he had gained as blockade Minister in the management of inter- 
allied organizations would seem to have led him to realize more 
clearly than most of his colleagues, that the world was fully ripe 
for voluntary international cooperation, but not yet for compulsory 
collective action. The fact that several of the most constructive 
minds in the Secretariat—Jean Monnet of France, Sir Arthur Salter 
of Great Britain, and Attolico of Italy—had been active in these 
organizations, was certainly not without influence on the evolution 
of the League towards the accomplishment of its so-called technical 
tasks. This evolution was due also to the difficulties encountered 
in the field of political organization for which the League had been 
primarily devised. It was due chiefly, however, to the demand for 
positive reconstruction which was felt throughout the world and 
which, it is today more and more generally realized, cannot be ac- 
complished on a purely national basis. 

By establishing and maintaining personal contacts and continuous 
cooperation between the leading statesmen, government officials, 
bankers, and other experts of the principal nations, by developing 
new methods and traditions of work in common, and by setting new 
standards of international ethics, the League to promote interna- 
tional cooperation is perhaps today the most effective League to 
promote peace. Its procedure is not dramatic nor such that brings 
it into the headlines of newspapers. Although this may disappoint 
the journalists, for whom bad news is proverbially good news and 
good news invariably bad news, it should on the contrary reassure 
the rest of peace-loving mankind, for whom the best news is no news. 

In spite of the great and varied successes of the League to promote 
international cooperation, and in spite of the many difficulties 
encountered by the League to prevent war, the latter purpose re- 
mains of course the chief aim of the institution as a whole. An 


analysis of the Covenant shows that its authors sought to combat 


international violence by means of five distinct weapons. Enumer- 
ated in the order of their apparent effectiveness up to date, these 
weapons are publicity, arbitration in the broadest acceptance of that 
elastic term, disarmament, sanctions, and the revision of treaties. 


[25] 


296 f 


The greatest service the League of Nations has so far rendered 
the cause of peace, besides the habits of international cooperation 
it has fostered is, to my mind, the very widespread interest it has 
created and stimulated the world over in foreign affairs. The Wil- 
sonian formula concerning the pacifying virtues of “‘open covenants 
openly arrived at ’’ has often been scoffed at. As many other fa- 
mous oratorical phrases, if taken literally, it constitutes an easy 
mark for critical sarcasm. At bottom, however, it expresses a vital 
truth. 

The secrecy which in the past has always surrounded diplomatic 
negotiations, has often favored intrigue and has invariably bred 
distrust. Diplomatic intrigue may of itself endanger peace and 
international distrust invariably does. The sunlight of publicity 
alone can dissipate the fogs of suspicion and melt away icebergs of 
instinctive antagonism which today constitute the two gravest perils 
of international navigation. Now, may we not say without exag- 
geration, that in the history of the world there has never been a 
time when foreign affairs have been so widely and so intelligently 
discussed by the man in the street as at the present? The sun of 
Geneva is effectively breaking through the clouds of ignorance and 
indifference which darkened and narrowed the intellectual horizon 
of past generations. 

This is due, not only nor even mainly to the publication of treaties 
which the Covenant has rendered compulsory. It is due to a high 
degree to the methods of public debate adopted by the Assembly 
and other League conferences, as well as to the growing measure of 
publicity which surrounds the deliberations of the Council. And it 
is due also to the establishment of a permanent laboratory of inter- 
national politics in Geneva which, situated in a wall-less glassroom 
has attracted an increasing number of increasingly well informed 
journalists and other students, who day by day follow the varied 
experiments which are there continuously carried on and report on 
them to their respective audiences. Doubtless much, very much 
remains to be done before the citizens of the world will be in a posi- 
tion and in a mood to judge of international affairs as the citizens 
of our most enlightened commonwealths judge of their own national 
affairs. But in this respect at least, humanity is on the march and 


its progress has been made easier and quicker through the efforts 


of the League. 
[26 ] 


297 


As a weapon to combat war, arbitration is much more closely 
4 Brelated to publicity than it would appear at first glance. As we 
_ define it for our present purposes, arbitration is the procedure by 
means of which disputes are submitted to the judgment of an 
' impartial authority. This authority must be impartial in the sense 
| that it cannot be a party to the dispute. It should also be impartial 
_ in the further sense that its decisions should be based solely on the 
_mierits of the case before it, and not on any special solidarity or 
_ sympathy with either of the litigants.1s It will be noted that arbi- 
tration thus defined includes arbitration in the technical acceptance 
_ of the term, judicial settlement, and investigation and report by the 
Council under Article 15 of the Covenant. 
_ In all these cases, international arbitration by itself can do no 
more for peace than to propose a solution for a problem which might 
otherwise be solved by the sword. In order that war be avoided, 
| it is necessary that the litigants accept the proposed solution. This, 
‘they may be obliged to do by the fear or by the effects of diplomatic, 
“economic, or military sanctions. They are, however, far more likely 
to do so as a result of the pressure of domestic and foreign public 
| opinion brought to bear on their respective governments in favor 
‘of the solution proposed by an impartial authority. That is why 
publicity, which alone can create an enlightened public opinion, is 
always a useful and may be a necessary auxiliary to arbitration as a 
means of peacefully settling international disputes. 
_ Arbitration, as we have defined it, has been promoted by the 
League both directly and indirectly. Directly, it has rendered com- 
| pulsory reference to the Council of all disputes arising between its 
| members which cannot be settled by other means. Indirectly, it 
has encouraged and facilitated arbitration properly so-called and 
is judicial settlement through the provisions of Article 13 of the Cove- 
nant and the establishment, under Article 14, of the Permanent 
| Court of International Justice. Furthermore, it has given a great 
/impetus to the movement in favor of arbitration by voluntary 
_ agreement under Article 36 of the statute of the court, as well as 
by special bilateral treaties. The multiplication and the enlarged 
© 18That is why the policy of alliances and of mutually pledged ‘diplomatic support,” 
hich dominated European pre-war Telations, is radically incompatible with a régime of 
eral impartial arbitration. That is why that policy, so clearly expounded by Viscount 
Grey, for instance, in his Twenty-Five Years, was always mercilessly condemned by Presi- 


Wilson. That is why also, so long as that policy survives in international relations, 
the ms of the League cannot become a universally trusted arbitrator in international 


b2zal 


298 ; ; 
scope of such arbitration treaties as have been concluded in the 
course of the last years between a large number of European states - 
are undoubtedly due to the influence of the League, as their authors 
will be the first to admit. 

Although no statement implying a judgment as to what might 
have been under other circumstances can ever be fully and scienti- 
fically substantiated, I have no hesitation in declaring that inter- 
national publicity and arbitration combined under the aegis of the 
League have in fact served to avoid war in the course of the last 
six years. It may suffice, not of course as a proof of my contention, 
but merely as an indication of what is in my mind when making it, 
to glance at the map and to allow one’s eyes to rest for a moment on 
such danger-spots as the Aaland Islands, Upper Silesia, Corfu, 
Austria, Albania, Mosul, and the Greco-Bulgarian frontier. 

Compared to publicity and arbitration, the three other weapons 
which the Covenant has placed at the disposal of the League have so 
far proved practically useless. No more real progress seems to have 
been made in the field of disarmament than one would quite natu- 
rally have expected after a world war, even without the establish- 
ment of the League of Nations. No international sanctions, except 
that of public opinion, have ever been applied or seriously con- 
sidered even in the cases when a strict interpretation of Article 16 
would seem to have called for them. And no Assembly has yet 
advised the re-consideration of any treaty, although it would be rash 
to assert that there were today no inapplicable treaties or no “‘in- 
ternational conditions whose continuance might endanger the peace 
of the world,” to quote the terms of Article 19 

To ask why these weapons, forged in 1919 have never been used 
is to ask why the League as an international organization has fallen 
short of the hopes and ambitions of its founders or at least of the 
hopes and ambitions aroused in the public mind by the most optimis- 
tic among its founders. It is at the same time to consider the prob- 
able course of future developments. This, we shall now proceed 
to do in a very brief conclusion. 


THE LEAGUE AS IT SEEMS LIKELY TO DEVELOP 


If we were to sum up in one phrase the results of our previous 
discussion, we might say that, in so far as the League has sought 
to serve and to promote voluntary international cooperation, it has 


[28 ] 


299 


been a great success, but that in so far as it has sought to exercise 
any coercive influence on world conditions, it has, except in the 
sphere of arbitration and publicity, almost completely failed. That 
is but to say that the League, far from being the dreaded super- 
State that its foes would like to be able to dissolve, has, as yet, 
made no appreciable inroads on the national sovereignty of its 
member States. The centre of gravity of political life is in no true 
sense in Geneva, but primarily in the capitals of the great powers 
of the world. Or, to speak the language of business, Geneva is a 
clearinghouse, not an executive office, an international stock ex- 
_ change, not the head-quarters of a world trust. 

The legalistically-minded commentators of the Covenant and the 
impatient friends of peace may deplore it, but the fact remains. 
_ Judge it as we may, it should at least reassure those whose ardent 
_ devotion to the principle of national independence has so far pre- 
_ vented from joining the ranks of the supporters of the League. 

But what about the future? If, as we staunchly believe, the 
League as it is, has served the interests of peace without encroach- 
' ing upon the sphere of national sovereignty, is it not desirable that 
- it should, and probable that it will remain as it is? It is always 
rash to venture on the perilous paths of prophecy. Were I asked, 
however, my reply to both these questions would be in the negative. 

The creation of the League at the beginning of the twentieth 
century and on the morrow of the great war was not an accident. 
Setting in after the Napoleonic period over a hundred years ago, a 
1 movement towards increasing international organization is clearly 
observable ever since. Promoted and hastened by the development 
of the means of communication, stimulated by the economic needs 
arising out of the international division of labor, large scale pro- 
duction, and world trade, as well as by the social and political needs 
| which have resulted therefrom, this movement expressed itself in 
countless voluntary, semi-official, and official international asso- 
| ciations and unions. 
| The present League also is clearly the child of this vast cooperative 
movement. The World War, which is so often looked upon as 
| its parent, might perhaps more fitly be described as a mid-wife who 
| merely assisted in its birth. Now, the underlying factors which 
| produced this movement are today more actively at work than ever 
| before. It is therefore not to overstep the bounds of scientific cau- 


[29] 


product of a long evolution tending towards the political organiza- 
tion of the world, willlive and grow. It does not seem at all prob- 
able, but it is not absolutely inconceivable that it might die, in 
order that another institution, which could not be essentially differ- 
ent in function, might take its place. But some permanent inter-— 
national organization there must be to meet the increasing common 
needs—economic, social, and political—of a world composed of 
interdependent nations, which can thrive only in peace and progress 
only through cooperation. 

If there be any truth in this evolutionary conception, it is ob-— 
vious that the League, as all living organisms, cannot remain as it is. © 
It must either die, or grow and change. 

In which ways may it be expected to develop? If the law of 
causality prevails in the political sphere as elsewhere, one may 
confidently assert that the League of Nations will tend more and 
more perfectly to fulfill the purposes for which it was created. 

Following the lines of least resistance, it will for the first not im- 
probably continue to multiply its cooperative functions. In re-— 
spect of these functions it will soon become universal in membership, 
as international cooperation is useful for all nations and cannot 
be fully effective except with the help of all. One may remark that 
for this purpose it is quite immaterial whether the number of the 
States signatory to the Covenant increases or not. 

‘Furthermore, one may expect cooperation gradually to extend to 
spheres which are as yet the exclusive domain of national sovereign- 
ty, such as the regulations governing the exploitation of natural 
resources, international trade, and international migration. The , 
progress in this field may first be regional—something like a Euro-| 
pean customs union already appears to loom up on the distant hori- 
zon of political possibilities. But here also the movement can hardl 
fail to become universal in time, time counted not by years, but by 
generations or even by centuries. It is curious to note in this 
connection that while the international regulation of trade and 
migration, which is as yet taboo in America, is beginning to be. 
discussed in Europe, the position as regards the international regu-| 4 
lation of the exploitation of natural resources is exactly the reverse 

While some such evolution is proceeding in the field of coopera- 

tion, perhaps under the threat of another war,—let us hope that) 


[30 ] 


300 
tion to believe that the League of Nations, viewed as the latest 


301 


it has not to be as the consequence of another war—one may expect 
the League to grapple more effectively with the problem of inter- 
mational security. 

The peoples of the world are unanimous in demanding security 
und they are becoming more and more restive under the burden of 
aational armaments, which the lack of security alone obliges them 
fo maintain. Here also it is normal to expect that progress will first 
prolong the lines of past experience. Arbitration and publicity com- 
bined may, for many States, increase the feeling of security and 
thereby promote a gradual reduction of national armaments. But 
‘eal and general international security can never be achieved unless 
und until the League is endowed with what President Wilson called 
‘the organized major force of mankind.” 

In closing his memorable address before the League to enforce 
eace on May 27, 1916, that statesman, whose greatest failing was 
yerhaps a far-sightedness which caused him to see the possibilities 
f the distant future more vividly than the difficulties of the imme- 
liate present, declared: 


I came only to avow a creed and give expression to the con- 
fidence I feel that the world is even now upon the eve of a 
great consummation, when some common force will be brought 
into existence which shall safeguard right as the first and most 
_ fundamental interest of all peoples and all governments, when 
coercion shall be summoned not to the service of political am- 
| bition or selfish hostility, but to the service of a common order, 
a common justice, and a common peace. God grant that the 
dawn of that day of frank dealing and of settled peace, con- 
| cord, and cooperation may be near at hand! 


| After six years of the existence of the League of Nations which 
*resident Wilson, in spite, or rather on account of his generous il- 
asions, did more than any other man to found, we may safely 
lay that the dawn of that day has broken. But it will be a day sin- 
ularly long and arduous before the world, delivered from the curse 
war, will truly be able to hail the great consummation which he 
loretold. 
That it will come is not merely an ardent hope, but a reasonable 
ctation. We believe in it, not only because something tells us 
|hat the poet did not err when he wrote: 


Ei] 


+302 


“For right is right, since God is God, 
And right the day must win; 
To doubt would be disloyalty, 
To falter would be sin.” 


We believe in it also because we wish to avoid that which for men 
of science is almost worse than disloyalty and sin, namely blunder 
and error. If civilization does not overcome war, war, with the 
progress of science, will overcome civilization. Now suicide, indi- 
vidual or collective, although not an impossible accident, is not a 
likely contingency that it is rational to anticipate. 


[ 32] 


303 
. 


THE ADMISSION OF GERMANY TO THE LEAGUE OF 
NATIONS AND ITS PROBABLE SIGNIFICANCE 


BY CALEB PERRY PATTERSON 


University of Texas 


GERMANY’S ADMISSION TO THE LEAGUE OF NATIONS 


It is probably true that Germany would have been admitted 
to the League of Nations at the time of its organization but for 
French influence.t The diplomacy of Quai d’Orsay triumphed over 
that of Crillon. Quai d’Orsay—the home of the French Foreign 
 Office—believed as Comte said that “we live dead men’s lives.” 
Entrenched behind gray stone walls and iron gates on the banks of 
the Seine, it proposed to follow history—the habits of the past. The 
key to its procedure was the methods of the old order. The implaca- 
ble Georges Clemenceau was its personification. 

Hotel Crillon—the home of the American delegation and meeting 
place of the League of Nations Commission—just across Place de la 
Concorde from Quai d’Orsay—was a veritable antipode in its attitude 
toward the problems of peace. It was here on the third floor in 
Colonel House’s office that the League of Nations Commission—the 
hardest-worked commission at the Paris Congress—in its fifteen 
sittings constructed the Covenant of the League of Nations. Quai 
d’Orsay was primarily interested in security for France by the par- 
' tition of Germany, by crushing Germany financially, by making a 
buffer state out of the Rhineland, by a security-pact with Great 
' Britain and the United States, by the disarmament of Germany, and 
‘finally by a league, if it could have an international army and navy. 
Preferably still, by all of these means, if possible, France meant to 
establish her supremacy on the Continent. 

Wilson did not believe that security for the old order of things 
would satisfy mankind. He believed that the world should be 
organized to serve humanity, whose interests he regarded as superior 
to those of any particular social or political order. He was for a 
settlement on a basis of liberal principles, but he gradually came to 

1See Keller, Francis, Security Against War, I, pp. 1-36; Lansing, Robert, The Peace 
ee ecsations, pp. 28-47; Tardieu, André, The Truth About the Treaty, pp. 77-124; Nitti, 


tancisco, The Wreck of Europe, pp. 264-94; and Baker, Ray Stannard, Woodrow Wilson 
. World Settlement, I, pp. 174-201. 
a 


SS 


sad 


304 


realize that a great many concessions would have to be made to the 
forces of conservatism. He possibly compromised too readily at 
times, feeling that the settlements were temporary and that they 
would be reconsidered after men had regained their sanity. Hence, 
he placed the emphasis on the establishment of an agency of recon- 
struction.2. Accordingly in his address to the joint session of Congress, 
January 8, 1918, he proposed that a ‘“‘general association of nations” 
be established. In the address at Mount Vernon, July 4, 1918, he 
spoke of an “organization of peace.”’* He had also spoken of peace 
without victory. He wanted to stop the war as soon as possible to 
prevent unnecessary destruction of civilization. He believed that a 
fairer peace settlement could be made if the war closed before either 
set of belligerents became able to impose their will upon the other. 
He did not believe that a people should be punished for the acts of 
irresponsible leaders. From his speeches, his addresses to Congress, 
and his diplomatic notes, it is not difficult to deduce the President’s 
theory of peace and the new order. He must have anticipated a 
peace settlement made by all nations and an international organiza- 
tion established by and consisting of the entire family of nations. 
Undoubtedly this vision of the President was a material factor in 
causing Germany to agree to an armistice. Germany regarded the 
President as the spokesman of the Allied and Associated Powersand 
accepted the ‘‘Fourteen Points”’ as the basis of final settlement. 

When the Germans received the Treaty of Versailles, they saw 
that the ‘‘general association of nations” had been changed into a 
close association of the Allied and Associated Powers with a few 
neutrals, that privileged positions had been granted to five of these 
major powers in the Council, and that the rule of unanimity required — 
in the Council for admission to the League would enable France to } 
prevent their entrance indefinitely. They protested against their 
exclusion from the League, but France had her way. 

2 Baker, op. cit., III, 80, Article III, Wilson’s First Draft of the Covenant, t 

8 Ibid., III, pp. 44-45. The fourteenth point of the President’s program of recon- | 
structing the ‘world said that “A general association of nations must be formed under 
specific covenants for the purpose of affording mutual guarantees of political independence | 
and territorial integrity to great and small states alike.’ 

4 Ibid., III, pp. 45-56. | 

5 Lloyd George was a reactionary while the treaty was being prepared. After the 
treaty was published and the liberal press of the world, especially, in Great Britain, began 
to comment on it, he became very much alarmed at its harshness and injustice, but Clemen-_ 
ceau refused to modify it. | 

The Labor Herald said: ‘The Treaty is entirely in the spirit of the old régime. . . . 
The League of Nations is their only concession to new ideas and it is a mere patch of new 
cloth on a rotting garment.’ 

The Observer found hope in the League. The Manchester Guardian said: “In the League | 


of Nations the President has put into the hands of ithe peoples an instrument effective for | 
their deliverance both from tyranny and anarchy.” 


[34] 


—— 


395 


After it was seen that Germany would not be admitted as a charter 
member of the League, an effort was made by members of the 
American delegation to fix the date for her admission. It was felt 
that Germany’s admission to the League would mean the disestab- 
lishment of military government over the 6,000,000 Germans in the 

Rhineland for which the treaty provided. If this concession could 
be made, it would help induce the Germans to sign the treaty, which 
now many European statesmen, even Lloyd George, began to fear 
that they would not do.§ France again refused to permit any modi- 
fication of the terms of the treaty and the problem of Germany’s 
admission to the League was left to the machinations of the foreign 
officers of the world.7 After Germany’s demand for admission to the 
| League at the hands of the Peace Congress in 1919 and its refusal, she 
continuously treated the League with indifference, although her ad- 
mission was the subject of frequent discussion among League officials. 
At the first meeting of the Assembly of the League in November, 
1920, the Argentine Minister of Foreign Affairs offered the following 
resolution as an amendment to the Covenant of the League: 


| That all sovereign states recognized by the community of 
nations be admitted to join the League of Nations, in such a 
_ manner that if they do not become members of the League of 
| Nations, this can only be the result of a voluntary decision on 
| their part. 


| This proposed amendment sought to restore the League to the 
| original proposal of universality as well as it eliminated all barriers 
‘to Germany’s admission. France, supported by her Continental 
allies, prevented this resolution from being discussed. 

In another connection in the same session of the Assembly, Presi- 
dent Motta, the Swiss delegate, speaking on the admission of Austria, 
said: 
| Germany asked the Peace Conference for admission into the 
League of Nations. At that moment the Peace Conference did 
not see its way to grant this wish. Allow me to tell you in all 


frankness and in all sincerity, that we understood this attitude, but 
that we in Switzerland did not share 1t.8 


The French point of view at this time was expressed by the im- 
passioned René Viviani as follows: 


6 General Smuts said that the Germans ‘‘should not merely be made to sign at the 
point of a bayonet.” 

7See Baker, op. cit., II, pp. 102-23; III, p. 402. 

8 Records of the First Assembly, Plenary Session, p. 572 


[35 J 


306 


. In the eyes of France, the League of Nations was 
a universal body. May I say that this is not the first time that 
a statement of this nature has been made by a Frenchman. But 
let us be precise, for we must have no ambiguity here. 

What is the position of the League of Nations with regard to 
Germany? If I may venture to use a term employed in the 
law courts, we are the defendants; it is for Germany to act the 
plaintiff. It is not for us to appeal to her; it is for her to make 
herself worthy to be received.® 


— 


It is probably true that after 1920 Germany could have polled 
the necessary vote in the Assembly for membership in the League, 
but for a permanent seat in the Council the affirmative vote of France 
was necessary. This she knew she could not obtain, and since she 
would not enter the League except on the condition of being granted 
a permanent seat in the Council, she became increasingly indifferent 
apparently toward membership in the League. For four years 
after 1919, she indicated no disposition to apply for membership in. 
the League. Of course, the questions that were most vital to Germany 
from 1919 to 1924 were not within the jurisdiction of the League.° 

This fact plus Germany’s rather rapid economic recovery and 
rapprochement with Russia, combined with the significant fact that 
Russia, United States, Germany, Argentina, Turkey, and Mexico— 
‘some 400,000,000 of people—were not in the League, “made Great 
Britain and France the more solicitous about Germany’s admission 
to the League. Again, there is a growing feeling throughout Europe 
that if European or western civilization is to survive and if Europe 
is to maintain her leadership in the western world, she must work in 
concert. In the minds of many European statesmen, it is internation- 
al cooperation or death." ‘‘We no longer see the United States of 
Europe as a Utopia,” says H. G. Wells, “but as a stern necessity 
that must override our proudest patriotisms and our dearest ha-| 
treds.’’!2. The Great War has caused peoples like the Chinese and 
Indians to be much less inclined to accept western civilization which, 
they believe, will ultimately destroy itself. The prestige of the great 
colonizing powers of Europe has been considerably compromised by 
their conduct in recent years, and it remains to be seen in the minds 

9 Ibid., p. 573- 

10 These matters were in the hands of Committees of Experts provided by Article 234 
of the Treaty of Versailles. 

11 Caillaux, Joseph, ““Europe Must Unite—or Die,” World’s Work, November, 1926, 
DP. 34-39; see ‘‘France and Germany”’ by ‘‘Augur,’’ Fortnighily Review, August, 1926 
we ee nepe Year Book (1926), p. 4. | 
[36] 
y 


307 


of their colonials whether they are entitled to the leadership" of the 
world. ‘In short,” says Ramsay Muir, ‘there has never been a 
- moment when the behavior of Europe as a whole and of its member 
states was of more vital moment both to themselves and to human- 
ity.’"14 It is very encouraging that Europe has become exceedingly 
critical of its ideals and its technique. 

Again, back of all these more or less obvious forces and conditions, 
is the social and political evolution that is actually reconstructing 
European life and institutions. New classes are coming to power. 
Both an economic and political democracy is developing that is 
forcing compromises. Socialism has been either the party of the 
government or the party of the opposition in Great Britain, France, 
and Germany for the most part since 1920 and has been strong enough 
_in other countries to force a consideration of its foreign policy. 

It was the foreign policy of socialism that was really responsible 
for the turn of events that brought Germany into the League. It 
was when MacDonald and Herriot were premiers of Great Britain 
/ and France, both having assumed the portfolios of foreign affairs, 
that Germany was invited to join the League. It was on September 
4, 1924, during the session of the Fifth Assembly of the League that 
-Ramsay MacDonald referred to “the menacing vacant chair in our 
| midst.”’ The following day M. Herriot expressed a similar sentiment. 
It also developed that MacDonald had been corresponding with the 
| German Chancellor with the view of discovering the attitude of the 

German Cabinet toward the League. During this session of the 
Assembly considerable communication took place between members 
lof the Assembly and officials of the German government. On 
September 15, Fridtjof Nansen of the Norwegian delegation in the 
| Assembly left for Germany for a conference with Chancellor Marx 
about Germany’s applying for admission to the League.15 September 
22, Herr Stresemann, Minister of Foreign Affairs, discussed this 
_matter with Lord d’Abernon, the British Ambassador to Germany. 


The German Government Sends a Memorandum to the League 


As a result of these overtures, the German Cabinet with a full 
membership presided over by the President of the Reich, after a two- 


18 By leadership is not meant domination on material grounds, but that finer and higher 
quality of moral or spiritual ascendency. 

14 Europa Year Book (1926), p. 5; see also Heathcote, Dudley, “‘The New Europe— 
Mussolini’s New Conception of State,” Fortnighily Review, July, 1926, pp. 18-28. 

18 World Peace Foundation, IX, No. I, p. 18. 


[37] 


308 


hour discussion, decided on September 23 to seek an early entrance 
into the League.** Germany, however, desired to have an expression 
from the ten member states of the Council of the League on certain 
matters vital to her before making application for membership in 
the League and for this purpose on December 12 the German Cabinet 
addressed a memorandum to the Council of the League, raising for 
discussion the following points, in substance:” 


“1. Germany must know that she will be elected to a permanent 
seat in the Council on being admitted to the League. 

2. Since under Article 16 of the Covenant, coercive measures 
may be advised against any state breaking the peace of the world, 
and since Germany is disarmed and, therefore, might suffer excessive- 
ly in case of armed conflict, she will have to reserve the right of 
neutrality. f 

3. Germany feels, in view of her sincere intention to observe her 
international obligations and her readiness so to declare, that con- 
ditions in the Rhineland and Ruhr compatible with the provisions 
of the treaty of peace should be speedily reestablished. 

4. Germany “‘expects that in due time she will be given an active 
share in the working of the mandates system of the League of 
Nations.” 


On March 14, 1925, the Council of the League replied favorably 
on all the points raised by the German memorandum except as to the 
obligations under Article 16 of the Covenant, pointing out in this 
connection that for Germany to remain neutral under the circum- 
stances contemplated by this article ‘“‘would undermine the basis 
of the League.’ The Council closed its reply by expressing “to 
Germany its sincere wish to see her associated in its labors, and 
thus play, in the organization of peace, a part corresponding to her 
position in the world.” 

While these negotiations were in process, Germany had on Febru- 
ary 9, 1925, initiated the correspondence that, following the London 
Conference, had led to the Locarno agreements. France, after the 

16 Sixth Year Book of the League of Nations, p. 143. 

17 For a full text of this communiqué, see the Sixth Year Book of the League, pp. 145—-SI. 

18 The Council after further correspondence with the German Cabinet agreed upon an 
interpretation of Article 16 of the Covenant and informed the German Cabinet that “In 
accordance with that interpretation, the obligations resulting from the said article on the 
members of the League must be understood to mean that each state member of the League 
is bound to cooperate loyally and effectively in support of the Covenant and in resistance 


to any act of aggression to an extent which is compatible with its military situation and 
takes its geographical position into account.” 


[38 J 


: 309 


passing of many notes between Quai d’Orsay and White Hall, finally 
decided she would not sign the Locarno Agreements unless Germany 
_ would enter the League, and Herr Stresemann was so notified on 
_ June 16, 1925. 

July 20, 1925, the German government replied that it would 
raise no objection to considering the two propositions as one. In 
pursuance of this agreement, the Locarno treaties were signed in 
London, December 1, 1925, on the understanding that they would 
not become operative until Germany entered the League 

At this stage of the game it would appear that Germany’s entrance 
into the League would take place without the least friction. The 
_ German government placed this interpretation on the situation, and 
_ accordingly on February 8, 1926, Herr Stresemann wrote Sir Eric 
_ Drummond, Secretary-General of the League, asking him in the name 
of the German government to propose Germany’s admission to the 
League and to place the proposal on the agenda of the Assembly as 
soon as possible.?? 


F 
{ 


BERLIN, February 8, 1926 
= SIR: 

With reference to the German memorandum of September, 
_ 1924, to the Governments represented on the Council, and to 
_ the German note addressed to you on December 12, 1924, and 
_ the reply thereto of the Council of the League dated March 14, 
_ 1925, as well as to the note of the other parties of the Locarno 
_ treaties of December 1, 1925, of which a copy is attached, I 
_ have the honor, in accordance with Article 1 of the Covenant 
; of the League of Nations, to propose herewith in the name of 
_ the German Government the admission of Germany to the 
League of Nations. I beg you to put this proposal on the agenda 
_ of the Assembly as soon as possible. 

I have the honor, 

| (Signed) STRESEMANN. 


Extra Session of the Assembly Called for March 8, 1926, 
to Admit Germany 


_ What was the situation under which the Assembly met? (@) 
‘The representatives of the ten states having seats in the Council 
had agreed to recommend unanimously to the Assembly Germany’s 
‘election not only to membership in the League but also to a per- 
ent seat in the Council; (0) they had agreed to Germany’s 
_ The full letter is as follows: 


[39] 


310 


active participation in the work of the League; (c) since the Council 
is representative of the entire membership of the Assembly, presum- 
ably Germany would secure as favorable consideration by the 
Assembly as it had secured by the Council; (d) Germany had in 
good faith applied for membership in the League, and, therefore, 
expected to be treated in accordance with the way things appeared 
on their face. 

When the Council and Assembly met, what happened??? It 
developed that the foreign offices of Europe had been playing their 
old game of secret diplomacy, trading with each other.2° In brief, 
Spain, Brazil, and Poland, who had agreed to vote for Germany’s 
admission and a permanent seat, now said that they would still do 
this if they were given permanent seats in the Council at the same 
time. There was nothing new in the demands of Spain and Brazil, 
though it was new for them to make the granting of these demands a 
condition for the fulfilment of their promises that had unconditionally 
been made just a few weeks previously, but the world was surprised 
when Poland demanded a permanent seat in the Council. 

Poland based her claim on (a) her population, (6) her strategic 
location between Germany and Russia, (c) the volume of her business 
with the League over minorities—Danzig and Upper Silesia, (d) 
her interests in the Locarno Agreements. Of course, Poland’s claim 
was indefensible because many other nations could have constructed 
just as strong cases, and it was obvious that her claim was in fact a 
scheme for France to secure a permanent ally in the Council. Sweden, 
a member of the Council, was unalterably opposed to increasing its 
membership beyond the election of Germany to a permanent seat. 
The German delegates, Luther and Stresemann, were instructed to 
withdraw Germany’s application if other powers were admitted. 

There were several attempts at compromise. It was proposed to 
create a temporary seat for Poland. It was suggested that Czecho- 
slovakia should resign her seat to make way for Poland. Sweden 
actually offered to give up her seat, but the German delegation 
refused to accept membership on this condition. It was also proposed 
that the matter of permanent seats for Spain and Brazil be deferred 
until fall and that Germany agree not to oppose their entry. The 
German delegates refused to agree to this bargain. 


20See Rappard, William E., ‘‘Germany at Geneva,’’ Foreign Affairs, July, 1926, pp. 
535-46. This article shows ina very illuminating way the details of this game. 


[ 40 J 


311 


On March 17, the Assembly met, after doing nothing for several 
days while representatives of the powers were trying to trade with 
each other, merely to be informed that the admission of Germany 
would have to be deferred until September. After several speeches 
were made, deploring the failure to admit Germany, M. Briand said: 
“Tet us take this lesson to heart; but, undiscouraged, let us apply 
ourselves to the work of reform and renovation,’’2! and concluded 
by proposing a resolution deferring Germany’s admission until 
September. The resolution was carried and the Assembly adjourned. 
Professor Gilbert Murray explained the failure to admit Germany 
last March as follows: 

Things have not gone wrong because of the League, but 
because of the absence of the League. Throughout the critical 
period the League machinery was never used. There were no 
public meetings of the Council; no meetings of the Assembly. 


The League ceased to function while particular groups of powers 
_ met and struggled and bargained in secret.” 


Lord Oxford in the House of Lords on March 24 rather severely 
arraigned His Majesty’s government for its action at Geneva, and 
concluded by saying: 


Will they secure as far as they can that in the future the 
machinery of discussion in the Council and in the Assembly shall 
_ be regarded in all the stages, not only as the normal procedure 
| preliminary to any decision, but as only to be superseded and 
set aside by the authority of the League itself? I want to get 
rid, and I believe we all want to get rid, of the kind of thing 
' which went on at Geneva—the closed doors, the bargainings, 
| the intimate gives and takes between elect bodies—and to have 
the whole thing done, as the League of Nations evidently con- 
templated it should be done, in the light of day, with the Assem- 
bly and the Council, both of them representative bodies, in 
complete control of the whole thing.” 


Proposal to Reconstruct the Council 


It was clear after the debacle of March that the only way Germany 
‘could enter the League and secure a permanent seat in the Council 
. . . . 

was for Spain, Brazil, and Poland to withdraw their demands or to 
1 “There is no doubt that a strong feeling of indignation is growing up among the 
delegates to the Assembly, who have now been here nearly a week and have had practically 
‘nothing to do. Not only have they wasted their time but they resent the fact that a 
| matter in which the Assembly is closely concerned should be settled above their heads.”’ 
—The Times, March 12, 1926. 


22 Manchester Guardian, March 18, 1926. 
% The Liberal Magazine, Vol. XXXIV, p. 242. 


[4x] 


312 : 
reconstruct the Council to satisfy these demands. These thre 
powers gave no indications of a change of attitude, so a commission 
consisting of representatives of the ten member states of the Council 
and of Germany, Switzerland, Poland, China, and Argentina, wa: 
appointed to propose a scheme of reconstructing the Council. Thi 
commission met at Geneva, May Io to 17, under the presidency o 
M.Motta,the Swiss delegate,and decided that the permanent member 
ship of the Council should not be changed except for an additiona 
seat for Germany.” 

V This decision seemed to narrow the problem to a a reconstructio1 
of the non-permanent seats in the Council. For this purpose Lor 
Cecil’s plan was favorably considered by all except the South Amer 
ican delegates. His plan provided that ‘‘the number of temporar 
members should be increased from six to nine, and that they shoul 
be elected for a period of three years. At the end of that period the 
should be non-eligible for three years; but certain exceptions may b 
made, if the Assembly so decides, by a two-thirds majority.’’25 

The purpose of the provision that certain powers might be declare 
reeligible by a two-thirds vote of the Assembly was to make i 
possible for Spain and Brazil to remain in the Council almost indef 
initely, since presumably they could always secure the votes of th 
Latin-American delegates. By this means Spain and Brazil would ii 
fact become permanent members of the Council, but would holt 
non-permanent seats. This solution had the merit of preserving th 
status quo as to the number of permanent seats in the Council ani 
of satisfying the pride of the powers demanding permanent membet 
ship in the Council. 

The commission on the composition of the Council resumed it 
sittings August 30, and on September 3 unanimously adopted th 
following report: 

ARTICLE I 


The Assembly shall each year, in the course of its ordinary 
session, elect three non-permanent Members of the Council. 
They shall be elected for a term commencing immediately on 
their election and ending on the day of the elections held three 
years later by the Assembly. 

Should a non-permanent Member cease to belong to the 
Council before its term of office expires, its seat shall be filled by 
24 The Times, May 18, 19 


26. 
25 The Liberal Magazine, Vel. XXXIV, p. 3009. 
% Ibid., Vol. XXXIV, pp. 586-87. 
[42] 


313 


a by-election held separately at the session following the occur- 
rence of the vacancy. The term of office of the Member so elect- 
ed shall end at the date at which the term of the Member whose 
place it takes would have expired. 


ARTICLE II 


A retiring Member may not be reelected during the period 
between the expiration of its term of office and the third election 
in ordinary session held thereafter unless the Assembly, either on 
the expiration of the Member’s term of office or in the course of 
the said period of three years, shall, by a majority of two-thirds 
of the votes cast, previously have decided that such Member is 
reeligible. 

The Assembly shall pronounce separately, by secret ballot, 
upon each request for reeligibility. The number of votes cast 
shall be determined by the total number of voting tickets depos- 
ited, deducting blank or spoilt votes. 

The Assembly may not decide upon the reeligibility of a 
Member except upon a request in writing made by the Member 
itself. The request must be handed to the President of the 
Assembly not later than the day before the date fixed for the 
election; it shall be submitted to the Assembly, which shall 
pronounce upon it without referring it to a committee and 
without debate. 

The number of Members reelected in consequence of having 
been previously declared reeligible shall be restricted so as to 
prevent the Council from containing at the same time more 
than three Members thus elected. If the result of the ballot 
infringes this restriction to three Members those of the Members 
affected which have received the smallest number of votes shall 
} not be considered to have been elected. 

ARTICLE III 

Notwithstanding the above provisions, the Assembly may at 
any time by a two-thirds majority decide to proceed, in applica- 
tion of Article 4 of the Covenant, to a new election of all the 
/mon-permanent Members of the Council. In this case the 
Assembly shall determine the rules applicable to the new 
| election. 
r 


ARTICLE IV 
Temporary Provisions 


h 


SECTION 1. In 1926, the nine non-permanent Members of 
the Council shall be elected by the Assembly, three for a term 
‘of three years, three for a term of two years, and three for a term 
‘of one year. The procedure of the election shall be determined 
by the General Committee of the Assembly. 


| [43] 


314 


SECTION 2. Of the nine Members thus elected in 1926, a 
maximum of three may be immediately declared reeligible by a 
decision of the Assembly taken by a special vote by secret bal- 
lot, a separate ballot being held for each Member, and adopted 
by a majority of two-thirds of the number of votes cast. Im- 
mediately after the announcement of the results of the elec- 
tion, the Assembly shall decide upon the requests for reeligibility 
which have been presented. Should the Assembly have before 
it more than three requests for reeligibility, the three candi- 
dates having received the largest number of votes, in excess 
of two-thirds of the votes cast, shall alone be declared reeligible. 

SECTION 3. The according in advance in 1926 to one, two, or 
three Members elected at that date of the quality of reeligibility 
shall not affect the Assembly’s right to exercise the power 
given by Article 2 in the years 1927 and 1928 in favor of other 
non-permanent Members retiring from the Council in those 
years. Itis, however, understood that, if three Members already 
possess the quality of reeligibility, the Assembly will only 
exercise this power in very exceptional cases. 


ES eee 


a Se 


The report of the commission was adopted by the Council of the 
League and, on September 14, the committee of the Assembly on 
constitutional and legal institutions unanimously recommended: 
this report to the Assembly, which unanimously adopted it September 
15. This scheme of reconstruction of the Council did not meet the 
approval of Spain and Brazil, who had already absented themselves 
from the Council, and announced their withdrawal from the League, 
thus making it possible for the Council unanimously to recommend t 
the Assembly Germany’s admission to the League and her electio 
to a permanent seat in the Council.” 


Germany’s Admission to the League 


On September 8, the general committee of the Assembly made the 
following report: 


1. That Germany be admitted to the League. 

2. That (a) she be elected to a permanent seat in the Council 
and (6) the non-permanent seats of the Council be increased 
from six to nine. 


| 


The Assembly unanimously adopted the report of its committee, 
however, the delegates of the Netherlands, Norway, and Swede 


27 “With the approval of the majority of the Assembly, the Council may name additional 
members of the League whose representatives shall always be Members of the Council; 
the Council with like approval may increase the number of members of the League to be 
selected by the Assembly for representation on the Council.’’—The Covenant of the League, 
Art. IV, Sec. 2. } 

[44 ] 


315 


expressed ‘‘ misgivings in principle to the creation of three more non- 
permanent seats in the Council.”*8 Thus in the presence of an 
international audience at Geneva and the publicity of the world 
Germany was admitted to the League in a little less than eight years 
after the signing of the Armistice. A telegram announcing Germany’s 
admission was immediately dispatched by Sir Eric Drummond, 
Secretary-General of the League, to the German government, and 
the German delegation under the leadership of Herr Stresemann left 
for Geneva that evening, arriving the next night. 

On September Io,at a dramatic and historic session of the Assembly, 
the German delegates took their seats amid the applause and satis- 
faction of a relieved world. The President of the Assembly, M. 
Nintchitch, of Czechoslovakia, in welcoming the German delegates, 
closed with the following significant remark: 


In extending a cordial invitation to the distinguished represen- 
tatives of Germany to take part in our work, I welcome their 
presence as a new pledge for the success of international collab- 
oration in the cause of peace.?9 


) 

: 

In response Herr Stresemann, after expressing Germany’s appre- 

ciation of the unanimous consent of the League to her admission and 
the hope that Brazil and Spain would remain in the League to help 

achieve its universality, concluded by saying: 


| It is our fervent hope that the tasks of the League may be 
_ fulfilled on the basis of the noble conceptions of peace, freedom, 
_ and unity. So shall we draw nearer the ideals to which we 
_ aspire, and it is the firm resolve of Germany to assist wholeheartedly 


in that task.?9 
| 


_ M. Briand, Minister of Foreign Affairs for France, followed Herr 
'Stresemann in a most impressive and happy strain. After expressing 


he expatiated on the significance of the occasion, saying: 


| 
| Henceforth our road is to be one of peace and progress. We ( 
\ 


-lay aside their pride, if we persuade them to sacrifice certain of 
their own desires in the service of world-peace. This sacrifice 
will not diminish, it will increase their prestige.*° 


3 The Liberal Magazine, Vol. XXXIV, p. 582. Lice 5 


29 [bid., p. 582. 
30 Tbid., p. 584. 


[45] 


his gratitude to the general committee of the Assembly for permitting | 
him to participate in welcoming the German delegation to Geneva, | 


f 


shall win real greatness for our countries if we induce them to \ 


316 


THE PROBABLE SIGNIFICANCE OF GERMANY’S ADMISSION TO THE 
LEAGUE OF NATIONS 


Germany is the strongest nation in Europe except Russia, which, of 
course, potentially is the America of Europe. 

Germany, with a population of more than sixty million, possessing 
almost a technical training for all phases of modern life, with an 
international reputation for efficiency, can be as powerful in further- 
ing the ends of peace as she was formerly in waging war. Herr 
Stresemann in his speech at Geneva gave every indication that the 
Germany of the present is genuinely interested in international 
cooperation. The cooperation “‘of the peoples in the League of 
Nations,’’ said Stresemann, ‘‘must and will lead to just solutions for 
the moral questions which arise in the conscience of the peoples. The 
most durable foundation of peace is a policy inspired by mutual 
understanding and mutual respect between nation and nation. ’’* 

The League without Germany was facing the same situation that 
the American forefathers had to confront when it appeared that 
New York State might not ratify the Constitution of 1787. New 
York finally ratified with only one vote to spare after the Federalist 
Papers had been written and after the pressure of the leading con- 
stitutionalists had been brought to bear upon her, but then too late 
to participate in Washington’s first election. It is not improbable 
that Germany’s refusal to cooperate with the League would have 
wrecked it. Her admission certainly means that the League has 
passed a crisis in its development and that its universality can now 
be regarded as within the realm of possibility, if not probability. In 
other words, the psychology of Germany’s admission will be very 
encouraging to the friends of the League and equally discouraging to 
its critics who have been hoping for its demise and who have even 
announced its death on more than one occasion. 

It means that the League is now in position for the first time in 
its history to handle the central problem of Europe: Franco-German 
relations. France and Germany must work together through the 
League in the presence of the representatives of fifty-five nations and 
in the limelight of the publicity agencies of the world. The League 
is now the round table of almost the organized world for the handling 
of the economic, social, scientific, and political problems that are 
within the field of world government. “It means,” said Briand, 

4 Ibid., p. 583. 


[ 46 ] 


— 


317 


“Peace for Germany and for France; that means that we have done 
with the long series of terrible and sanguinary conflicts which have 
stained the pages of history. We have done with the black veils of 
nourning for sufferings that can never be appeased, done with war, 
Jone with brutal and sanguinary methods of settling our disputes. 
True, differences between us still exist, but henceforth it will be for 
the judge to declare the law. Just as individual citizens take their 
lifficulties to be settled by a magistrate, so shall we bring ours to be 
settled by pacific procedure. Away with rifles, machine guns, 
cannon! Clear the way for conciliation, arbitration, peace! 
“Arbitration! That word is now at the height of its prestige and 
ts power. Arbitration treaties are increasing; nation after nation is 
sromising to abjure war and accept intermediaries. Peace is making 
ts way through all these undertakings, the spirit of the League is at 
the root of them; and for that reason all nations should devote 
themselves heart and soul to the League’s defense. It should be 
sheltered from all attacks and placed above all considerations. 
| “With the League goes peace! Without it, the menace of war and 
lood from which the peoples have suffered too long! This day should 
De commemorated with a white stone, the words of collaboration 
which Germany and France have just exchanged in a like spirit of 
sincerity should be marked with a white stone—and I for one will 
aever change the color of that stone.’’®? 
_ The admission of Germany caused the reconstruction of the Coun- 
“il. The Council now consists of the following permanent members: 
ritish Empire, France, Italy, Japan, and Germany; and the 
ollowing non-permanent members: Poland, Chile, and Rumania, 
iolding three-year seats; Colombia, Netherlands, and China, holding 
-wo-year seats; and Salvador, Belgium, and Czechoslovakia, holding 
yne-year seats. The reconstruction of the Council indicates a spirit 
of fairness to the little nations, nine of them having their own repre- 
jentatives in the Council who also represent the other small nations 
that are members of the League. The Council is the steering commit- 
‘ee of the League, speaking in the language of American committee 
ystems. This means that it prepares the program of the Assembly 
nd usually presents matters in such a way as practically to force 
he Assembly to accept its conclusions. It has all the information 
m the problems of the League, and by virtue of its small member- 
82 Tbid., pp. 584-85. 


[47] 


318 
ship, frequently assembles to digest this material. The Assembly b 
virtue of its large membership and short sessions will likely be force: 
to be an approving or rejecting body of what the Council propose: 
The history of the relations of such bodies indicates that the large 
generally approves the recommendations of the smaller. In view « 
these facts and the further fact that the Council may consider an 
act upon any matter affecting the peace of the world according to th 
Covenant of the League, it is highly desirable that the smaller natior 
whose interests are generally more international than national 
largely represented in the Council. It means also a larger group « 
experts—not too large—for collaboration. The Council is th 
cabinet of the League.’ It must direct matters since the Assembl 
regularly meets only once a year. 

Again, the reconstruction of the Council provides for the rotatio 
of the non-permanent seats, since the holders of these seats ar 
elected for three-year terms and are ineligible for reelection for thre 
years unless the Assembly by a two-thirds vote removes this inability 
This scheme of rotation will make for better feeling among the smalle 
nations, and should improve the esprit de corps of the League. 

Germany’s entrance into the League brought the Locarno Agre¢ 
ments into operation. The nine documents initialed at Locarnc 
Switzerland, October 16, 1925, signed at London, December 1, an 
put into effect by Germany’s admission September 8, 1926, eliminat 
the Rhineland as a danger zone for the first time since the divisio 
of Europe between the sons of Louis the Pious. They bind German 
on the one hand and Belgium, France, Poland, and Czechoslovaki 
on the other to settle all their future disputes by arbitration ¢ 
adjudication. Great Britain and Italy guarantee the security ¢ 
France. These treaties are made in harmony with Article 12 of th 
\ Covenant of the League, which reads as follows: 

The members of the League agree that, if there should arise — 
between them any dispute likely to lead to a rupture, they will 
submit the matter either to arbitration or judicial settlement or 
to inquiry by the Council. 

Locarno means the spontaneous acceptance and mutual guarante 
by all concerned of the present frontiers in Western Europe, and th 
permanent demilitarization of the Rhine zone. 

Disarmament for Europe is now a practical problem by virtue o 
Locarno and Germany’s membership in the League. Germany wai 


[48 ] 


319 


lisarmed by the Treaty of Versailles. The pledge she has taken under 
Article 16 of the Covenant of the League and in the Locarno Agree- 
nents will go very far toward convincing France of the uselessness 
ind foolishness of bankrupting herself by attempting to maintain a 
arge army. In fact, France is already disarming. Germany is also 
eginning to see that her disarmament is not only an advantage in 
ler economic recovery but a real asset in obtaining the confidence of 
he world for her leadership. She now has an opportunity to be first 
m peace as she was once first in war. Herr Stresemann said at 
seneva that he hoped by tactful work disarmament could be made 
eneral.3s 
_ The League has been seriously handicapped in the past by being 
he heir and executor of the treaties of 1919. It is now generally 
ecognized that those treaties could not be administered in a spirit 
f justice. Their very terms would prevent this. Again, the League 
yy this work has not only subjected itself to criticism and loss of 
estige, but has been prevented from developing its true functions 
inder the Covenant. Germany intends to shift the center of gravity from 
he treaties to the Covenant. The League must see that the common 
yelfare is the best of individual benefit. Its members must learn 
: sacrifice the prospect of gains made at the expense of others. 
The fact that you and I can communicate easily in this Assembly,” 
aid M. Briand to Herr Stresemann, ‘‘does not mean that all our 
lifficulties disappear. But if we each represent the true feelings of 
mur countries and face our difficulties with the determination to 
ettle them peacefully, there need be no strife. If you are here 
imply as a German and Iam here simply as a Frenchman, agreement 
vill not be easy, but if, without departing from the standpoint of 
r respective countries, we can regard ourselves as fellow-workers 
a the cause of the League, then everything can be settled. 
| swear, gentlemen, that I shall do my best not to come here in that 
pirit, and I count on the intelligence and pacific temper of the 
erman delegate to make the same effort. Let us beware of inter- 
‘jews and speeches. They drive us one against the other. In that 
vay lies disaster. Ours must be the road of peace and progress. Let 
ur countries sacrifice their amour propre for the sake of the peace of 
e world.’’#4 


% The Times, Sept. 14, 1926, p. 12. 
% Ibid., p. 12 


[49 ] 


320 


It is also clear that Germany expects to participate actively 
League affairs. She indicated this in the memorandum submitte 
to the Council before she applied for admission, and secured | 
favorable reply. In other words, the Council committed itself t 
this policy. What does this mean? What about the famous lune 
at Thoiry where M. Briand and Herr Stresemann evidently discusset 
the problem of readjusting the relations of their countries? Germany 
is profoundly interested in the problem of minorities—one of th 
major problems before the League and one over which the League ha 
only indirect jurisdiction, except through the minority treaties 
which by no means cover the situation, because these minorities ar 
actually incorporated in the body politic of their respective states 
There are some fifty millions of people in this situation, many of whon 
are Germans. It is difficult for them to secure a hearing before 
League because the matter is primarily one of domestic politic 
rather than one of international relations. This problem is to 
material to Germany for it to be successfully handled without he 
cooperation. 

Germany is also interested in the workings of the fae 
system because several of the mandates represent her former colonia 
possessions. There has been from the beginning an apprehensioi 
on the part of statesmen and students of world politics that q 
mandatory system was a mere camouflage for the old game 
imperialism. Especially might this be the case with the second 
and third-class mandates, in which classes the former Germat 
possessions were placed. Germany should certainly be representet 
in the mandate commission in all fairness either to her or to he 
former possessions. There is some indication that Germany desire 
to become a mandatory state; however, public opinion in Germany 
is divided on this matter. The proper administration of a mandate i 
a gratuitous service to humanity. History does not indicate tha 
nations have quarreled with each other over the opportunity ‘ 
render this type of service. The question is: Can this ideal actually} 
be embodied in the administration of the mandatory system? fe) 
better still, will it be? Germany has an opportunity to be an effectiv 
agent in the administration of this new type of government fo 
dependent peoples. 

There are many important and serious problems that can i 
virtue of Germany’s membership in the League be handled much mort 

[50 ] 


; 


; 321 
successfully. Among these might be mentioned the annexation of 
Austria to the German Reich, the government of Danzig and the 
Saar, transit and labor problems, tariffs, intellectual and scientific 
cooperation, the withdrawal of the military commission from Berlin, 
the evacuation of the Rhineland by British, French, and Belgian 
troops, and the codification of international law, to which Herr 
Stresemann made particular reference in his address to the Assembly. 
_ Germany’s influence should be a strong factor in increasing the 
membership of the League. Germany is more influential over Russia 
than other western powers; in fact, it is generally held that Germany 
and Russia are inseparable. In this connection it might be recalled 
that Russia made an effort to join the Teutonic forces during the 
Great War. Germany was the first great power to reestablish 
commercial and diplomatic relations with Russia after the war. 
Germany is also closely connected with the commercial developments 
of Turkey, Spain, Brazil, and Argentina. Turkey is her former ally. 
Argentina withdrew her official connection with the League in 1920 
because the League refused to consider a motion looking toward 
Germany’s admission. Spain was pro-German during the war. There 
# large groups of German settlers in Brazil. 

_ Will the admission of Germany to the League modify the attitude 
the United States toward the League? There are some reasons 
for such a conjecture. In the first place, scoffers at the League have 
een just a little discommoded by Germany’s admission, speaking 
mildly and sympathetically, because so many of their prognos- 
fications have not materialized. In the second place, the friends of 
the League may be stimulated to continue their propaganda still 
more vigorously. In the third place, since the German-Americans 
are almost unanimously Republicans, they may come to the support 
of the pro-League element in the Republican Party and help change 
its foreign policy. We know, of course, that the Irish Democrats 
have kept the Democratic Party anti-British, Why may not the 
German element count for as much in the Republican Party? Finally, 
since the League issue in the United States has become non-partisan, 
here will be an increasing tendency to value the League on the 
basis of its merits. This is the basis on which our attitude should 
e determined. 

After all, is Geneva a fool’s paradise or is it the melting pot of the 
world’s differences? It is true that Geneva is a rendezvous for 


Csr] 


322 


politicians, students, and world leaders from all corners of the 
earth. Here at lunches and dinners, in clubs, at institutes, and in 
League activities, friendships and contacts are made, and ideas are 
exchanged. Here one can hear an expert discuss the chief problems 
of civilization. Seventeen foreign ministers attended the meeting 
of the last Assembly. These ministers made contacts that they could 
not have made otherwise without attracting the attention of the 
world. Theyalso discussed matters in a personal way that the 
practice of foreign offices does not permit. We have to recognize that 
government is a matter of men, constitutions and judicial review 
to the contrary notwithstanding. If these men know one another’s 
attitude on the question under consideration, they can certainly 
work together much more successfully. No one can visit Geneve 
without being impressed with the seriousness of these leaders anc 
the honesty and ability of League officials. 

Personally, I believe at Geneva is being performed the mos 
challenging experiment in international government known t 
history. Europeans think the League is the formula for internationa 
cooperation that they have been needing for a hundred years. Wh« 
can say that it isn’t? Why not honestly try it? Is it not clear tha 
the outstanding need in political organization today is some satis 
factory and successful method of administering international affairs: 
Is it not a law of constructive criticism that those who would eliminat 
must propose a substitute? 


[52] 


323 


BIBLIOGRAPHY 


aker, P. J. Noel, The League of Nations at Work, Nisbet and Co., 
London, 1926, 135 pp. 
uell, Raymond Leslie, ‘‘The League of Nations,’’ Chap. XXVIII 
in International Relations, Henry Holt and Company, New York, 
1925, pp- 646-676. 
low, B. W. (von), Der Versailler Vélkerbund, Eine vorlaufige 
Bilanz, W. Kohlhammer, Berlin, 1923. 
utler, Sir Geoffrey Gilbert, A Handbook to the League of Nations, 
Longmans, Green and Co., London, 1925, 239 pp. 
uggan, Stephen P., The League of Nations, Atlantic Monthly Press, 
Boston, 1919, 357 pp. 
anshaw, Maurice, Reconstruction. Five Years of Work by the League 
of Nations, George Allen and Unwin, Ltd., London, 1925. 
isher, Irving, America’s Interest in World Peace, Funk and Wagnalls 
Company, New York, 1926. 
atris H. Wilson, What the League of Nations Is, George Allen and 
Unwin, Ltd., London, 1926, 128 pp. 
udson, Manley O., American Cooperation with Other Nations 
through the League of Nations, 1919-1926, World Peace Founda- 
tion, Boston, 1926. 
ohn, George F., The Organization and the Work of the League of 
Nations, Annals of the American Academy of Political and 
Social Science, Supplement to Vol. 114, July, 1924, 79 pp. 
gue of Nations (The): a Survey (1926), Prepared by the Informa- 
tion Section of the League of Nations, World Peace Foundation, 
Boston, 1927. 


gue of Nations (The): Its Constitution and Organization, Informa- 
tion Section, 1923, p. 6. 
owell, A. L., ‘The Future of the League,’”’ Foreign Affairs, Vol. 
IV, 1926, pp.525-535- 
unch, P., Les Origines et l’Oeuvre de la Société des Nations, 2 vols., 
Gyldendalske Boghandel, Copenhagen, 1923, 1924. 

[53] 


324 


Potter, Pitman B., The Covenant of the League of Nations; Tex, 
Index, ‘Interpretations (a syllabus), Carnegie Endowment fo 
International Peace, 1927, 58 pp. 

Quigley, Harold S., From Versailles to Locarno, Chaps. II and II 
University of Minnesota Press, Minneapolis, 1927, pp. 21-57 

Schiicking, W.: Wehberg, H., Die Satzwng des Vélkerbundes (2nd ed.) 
F. Vahlen, Berlin, 1924. 

Sixth Yearbook of the League of Nations—Record of 1925, Worl 
Peace Foundation, Boston, 1927. (Seventh Yearbook—Recort 
of 1926 will be published at an early date). 

Wambaugh, Sarah, “Geneva Seeks a New World; An Americar 
at the League of Nations,” Century, July, 1925, I1 pp. 

Williams, Roth, The League of Nations Today, George Allen ane 
Unwin, London, 1923, 223 pp. 

Woolf, L. S., International Government (2nd ed.), Allen and Unwin 
London, 1923. 


NOTE 


A complete bibliography of books and articles on the Leagut 
of Nations may be found in the following publications of the Leagu 
of Nations: Supplement to the Monthly Summary, February, 1926 
Books 1920-1925; Supplement to the Monthly Summary, March 
1927, Books 1926. 

The official publications of the League of Nations may be obtainet 
in the United States from the World Peace Foundation, 40 Mt 
Vernon Street, Boston, Massachusetts. 

The World Peace Foundation publishes, in its regular series, 
League of Nations’ Yearbooks. 

Material on the League may also be obtained from the League o 
Nations Non-Partisan Association, 6 East 39th Street, New Yo k 
City. 


[54] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, 1907 to No. 199, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international Lal ap and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
popcation to International Conciliation, 405 West 117th Street, New York 

ity. 

215. The Trend of Economic Restoration since the Dawes Reparation Settle- 
ment, by E. G. Burland, Member of the Staff of the American Section 
of the International Chamber of Commerce. 

December, 1925. 
216. Final Protocol of the Locarno Conference, 1925, and Treaties between 
France and Poland and France and Czechoslovakia. 
January, 1926. 
217. Peasant Conditions in Russia, 1925, by Jean Efremoff, Former Minister 
= Veiies aaa = the Provisional Government of Russia. 
e 
218. The Insti huts, ° Pacific Relations, by J. Merle Davis, General Secretary. 
March, 1926. 

219. The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 

April, 1926. 

220. Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 
berlain. 

May, 1926. 

221. Treaty-Making Power under the Constitution of Japan, by Tsunejiro 

Miyaoka, of the Bar of Japan. 
June, 1926. 
222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 
Rappard, H. Wilson Harris and Raymond Leslie Buell. 
September, 1926. 
223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 
in the Government of Italy. Recent Legislation in Italy. 
October, 1926. 

224. An Alternative Use of Force: When the Earth Trembled, by Richard 

J. Walsh; The Moral Equivalent of War, by William James. 
November, 1926. 

225. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 

Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 1926. 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

January, 1927. 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 

Recent Chinese Politics and Diplomacy. 
February, 1927. 

228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bniuce, 
Prime Minister of Australia. 2 

March, 1927. 
229. Locarno and the Balkans: A Turning Point in History, by James T. 
a geet The Possibility of a Balkan Locarno, by David Mitrany. 
pril 

230. The interallied Debts. Statements as to the Desirability of an Early 

Revision of Existing Arrangements. 
May, 1927. 

231. The League of Nations: The League of Nations as an Historical Fact, 

by William E. Rappard; The Admission of Germany to the League of 
I Nations and Its Probable Significance, by Caleb Perry Patterson. 
une, 1927, 


INTERNATIONAL CoNcILIATION 


Published monthly, except July and August, by the 
Carnegie Endowment for International Peace 


Entered as second-class matter September 15, 1924, at the post office at 
Worcester, Massachusetts, under the Act of March 3, 1879. 


THE PERMANENT COURT OF INTERNATIONAL 
JUSTICE 


THe UNITED STATES AND THE COURT 
BY QUINCY WRIGHT 


SIDELIGHTS ON THE CouRT 
BY AKE HAMMARSKJOLD 


SEPTEMBER, 1927 


No. 232 


CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 
DIVISION OF INTERCOURSE AND EDUCATION 
PUBLICATION OFFICE: 44 PORTLAND STREET, WORCESTER, MASS. 
EDITORIAL OFFICE: 405 WEST II17TH STREET, NEW YORK CITY 


Subscription price: 25 cents for one year, one dollar for five years 
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CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


Trustees 
Ropert S. BROOKINGS FRANK O. LowDEN 
NicHoLtas Murray ButLer ANDREW J. MoNnTAGUE 
Joun W. Davis Dwicut W. Morrow 
FREDERIC A, DELANO RoBert E. OLps 
Lawton B. EVANS Epwin B. PARKER 
Austen G. Fox LERoy PERcy 
ROBERT A. FRANKS Wii A. PETERS 
CHARLES S. HAMLIN Henry S. PrRitcHETD 
HowarpD HEINz ExLrau Root 
Davip JAYNE HILL James Brown Scott 
ALFRED HoLMAN JaMEs R. SHEFFIELD 
Wittiam M. Howarp Maovrice S. SHERMAN 
ROBERT LANSING James T. SHOTWELL 


Smas H. StRAwN 


Officers 


President, NICHOLAS Murray BUTLER 
Vice-President, ROBERT LANSING 
Secretary, JAMES BROwNn Scott 

Assistant Secretary, GEORGE A, FINCH 
Treasurer, ANDREW J. MONTAGUE 
Assistant Treasurer, FREDERIC A. DELANO 


Executive Committee 


NicHoLtas Murray Butler, Chairman 
James Brown Scott, Secretary 
Austen G. Fox HEnry S. PRITCHETD 
ANDREW J. MONTAGUE Exrau Root 
James T. SHOTWELL 
Division of Intercourse and Education 


Director, NicHoLAS Murray BUTLER 


Division of International Law 


Director, JAMES BRown Scotr 


Division of Economics and History 
Director, JAMES T. SHOTWELL 


RS Ror 


SP ie EE Rice. Ges res 


_s 


ie rs peer 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
Director, NicHoLAS MurrAY BUTLER 


Assistant to the Director, HENRY S. HASKELL 

Division Assistant, Avy Heminway Jones 
Office, 405 West 117th Street, New York City 
Telephone, Cathedral, 4560—Cable, Interpax, New York 


SPECIAL CORRESPONDENTS 


Sir WiLiraM J. Cottins, M.P., London, England 

JEAN EFREMOFF, Paris, France. (Russia) 

F. W. Foerster, Zurich, Switzerland. (Germany) 
HELLMUT VON GERLACH, Berlin, Germany 

Epoarpo GIRETTI, Bricherasio, Piedmont, Italy 

CuRISTIAN L. LANGE, Geneva, Switzerland 

David MitRANy, London, England. (Southeastern Europe) 
| TsSUNEJIRO MryaoKa, Tokyo, Japan 


Centre Européen 


Comité d’Administration 


Pau. APPELL, France, Président Henry LICHTENBERGER, France 


Moritz J. Bonn, Germany GILBERT Murray, Great Britain 
| GUILLAUME Fatio, Switzerland ALFRED NERINCX, Belgium 
| ALFRED G. GARDINER, Great Nicoras S. Potitis, Greece 
| Britain E. von PRITTWITZ UND GAFFRON, 
| Anpr& Honnorat, France Germany 
| Grorces Lecnartier, France JoserH Reptic#. Austria 


CounT Caro Srorza, Italy 


Directeur-Adjoint, EARLE B. BABCOCK 

Secrétaire Générale, Mitte. M. Tu. PEYLADE 

| Auditeur, TH. RUYSSEN 

Bureau, 173 Boulevard St.-Germain, Paris, France 

Téléphone, Fleurus 53.77—Adresse Télégraphique, Interpax, Paris 


CONTENTS 


_ Justice, Dygenker Hammearskjoldl. 8.5. das el ne ee 


RRUREN CES MIE Hole We ee eg aay d slate Gorell | Roms 


327 


PREFACE 


| Although many books, pamphlets, and articles have already been 
published on the Permanent Court of International Justice, it is 
hoped that the following document will be an acceptable contribution 
to this field of discussion and interest. The subject is treated from 
two points of view. Mr. Quincy Wright, Professor of International 
Law at the University of Chicago, gives the history of the relation 
of the United States to the Court since August 1921, while Mr. Ake 
Hammarskjold, Registrar of the Permanent Court of International 
Justice, describes the actual working of the Court at the Peace 
Palace at The Hague. 


NicHoLas Murray BUTLER 
New York, August 4, 1927. 


aa ee Oe ENE ee ee Oe eee 


Ee 


i" - 


‘ 22 


329 


THE UNITED STATES AND THE PERMANENT COURT 
OF INTERNATIONAL JUSTICE 


[Reprinted from American Journal of International Law, January, 1927, with additions 
based on material available since that time.] 


BY QUINCY WRIGHT 


Professor of International Law, University of Chicago 


On August 15, 1921, the Secretary of State of the United States 
acknowledged receipt from the Secretary General of the League of 
Nations of a certified copy of the protocol of the Permanent Court 
of International Justice opened for signature on December 16, 1920, 
by members of the League and states mentioned in the annex to the 
‘Covenant. On February 24, 1923, President Harding submitted 
‘the protocol and the accompanying statute to the Senate with a 
‘request for its consent to American adhesion with four “conditions 
and understandings”’ explained in an attached letter from Secretary 
‘of State Hughes, dated February 17, 1923.2 President Harding 
continued to speak for the Court until his death,? and on December 
6, 1923, President Coolidge commended the proposal to the Senate. 
Resolutions on the subject were introduced in the Senate by Senators 
Lenroot of Wisconsin (December I0, 1923), Pepper of Pennsylvania 
(April 7, 1924), Lodge of Massachusetts (May 5, 1924), Swanson 
of Virginia (May 5, 1924), King of Utah (May 20, 1924), and on 
May 26, 1924, Senator Pepper submitted a report from the Com- 
mittee on Foreign Relations endorsing his proposal for Senate consent 
with radical amendments to the statute. The minority of the 
‘committee submitted a report embodying the Swanson resolution, 
which followed the Harding-Hughes proposal, with the addition that: 
The signature of the United States to the said protocol shall 
_ not be affixed until the Powers signatory to such protocol shall 
' 1iThe United States, Ecuador, and the Hedjaz are the only states mentioned in the annex 
“tothe Covenant which are not members of the League of Nations. The texts of the proto- 


col and statute are printed in American Journal of International Law, Supp., Vol. 17, 
{22-, e 57- 
: J.1.L., Vol. 17, pp. 331-343 
Hits aor an exposition of Pde Harding’ s attitude, see remarks of Senator Willis of 
‘Ohio, Cong. Rec., Jan. 4, 1926, Vol. 67, p. 1418. 

468th Cong., tst Sess., Sen. Res. 29, 204, Sen. J. Res. 122 accompanied by Sen. Doc. 107, 

Res. 220, 233, 234, also printed in Sen. Doc. 116 and Sen. Report 634. See comments of 

|‘Senator Borah on the latter, Cong. Rec., Jan. 14, 1926, Vol. 67, p. 2038. 


[9] 


l 
{ 
: 
y 
: 


339 


have indicated, through an exchange of notes, their acceptance 

of the foregoing reservations and understandings as a part and 

a condition of adhesion by the United States to the said protocol. 

Both party platforms in 1924 endorsed the Court, and on Decem- 
ber 3, 1924, President Coolidge again commended the Harding- 
Hughes proposal to the Senate, with the additional condition that 
“our country shall not be bound by advisory opinions which may 
be rendered by the Court upon questions which we have not volunta- 
rily submitted for its judgment.’”® 

Resolutions on the subject introduced in the House of Represen- 
tatives by Mr. Moore of Virginia (April 17, 1924), and Mr. Fish of 
New York (January 28, 1925), were combined ina resolution reported 
favorably by Mr. Burton of Ohio from the Committee on Foreign 
Affairs on February 24, 1925.6 This resolution, which expressed the 
“earnest desire’’ of the House that the “United States give early 
adherence to the protocol . . . with the reservations recommended 
by President Harding and President Coolidge”’ and its “‘readiness to 
participate’’ in the enactment of necessary legislation, was approved 
(303 to 28) on March 3, 1925.7 

In his inaugural address on March 4, 1925, President Coolidge 
advocated adherence to the Court with the remark that “we ought 
not to withhold our own sanction because of any small and inessential 
difference,” and on the next day Senator Swanson reintroduced his 
resolution in the special session of the Senate, with an addition in- 
corporating President Coolidge’s suggestion in the following terms: 

5. That the United States shall be in no manner bound by 

any advisory opinion of the Permanent Court of International ~ 

Justice not rendered pursuant to a request in which it, the 

United States, shall expressly join in accordance with the statute 


for the said Court adjoined to the protocol of signature of the © 


same to which the United States shall become signatory. 


At the same time Senator Willis of Ohio introduced an almost 
identical resolution.2 On March 13, 1925, the Senate voted (77 to 2) 
to consider the Swanson resolution in open executive session on 


December 17, 1925.° : 
5See remarks by Senators Lenroot and Willis, Cong. Rec., Dec. 18, 1925, Jan. 4, 19a 
and Jan. 14, 1926, Vol. 67, pp. I07I, 1417, 2043. 

668th Cong., rst Sess., House Res. 258; 68th Cong., 2nd Sess., House Con. Res. 38, H. 
Res. 426; hearings on latter before Committee on Foreign Affairs, Jan. 21, 27, 3I, 1925, ang 
House Report 1569. 


7 Cong. Rec., Vol. 66, p. 5413; also A. J. I. L., Vol. 20, p. 151. ‘ 
860th Cong., Ist Sess., Sen. Res. 5, 6. See World Peace Foundation Pamphlet Series, 
1925, Vol. 8, pp. 207-216. = 


9 Cong. Rec., Vol. 67, p. 207. 4 
[10] j 


331 


On December 8, President Coolidge again endorsed the Court in 
his annual message, and on December 17 Senator Swanson opened 
‘the debate, which continued through over 300 pages of the Con- 
gressional Record, until January 25, 1926, when a filibuster having 
appeared, the cloture rule was put in effect by a two-thirds vote, 
and on January 27, 1926, the Senate accepted the resolution (76 
to 17) with certain modifications incorporated by Senator Swanson 
himself.1° 

These modifications disavowed the assumption of any obligations 
under the Treaty of Versailles instead of merely under the League 
Covenant, gave the United States the right to withdraw, and re- 
wrote the fifth reservation relating to advisory opinions. Two addi- 
tional provisions of a type becoming habitual in recent American 
practice were added but not included in the requirement of express 
‘assent by the present signatories. One insisted on Senate consent 
to agreements submitting cases to the Court and the other reserved 
the policies of Washington’s Farewell Address and the Monroe Doc- 
trine in the same terms used in reservations to the I Hague Con- 
vention. The fifth reservation, which constitutes the most serious 
departure from the Hughes-Harding-Coolidge plan, appeared in the 
following form: 


5. That the Court shall not render any advisory opinion ex- 
cept publicly after due notice to all States adhering to the Court 
and to all interested States and after public hearing or oppor- 
tunity for hearing given to any State concerned; nor shall it, 
without the consent of the United States, entertain any request 

for an advisory opinion touching any dispute or question in 
which the United States has or claims an interest. 


| The steps leading up to the formulation of this reservation may be 
briefly considered. On December 18, 1925, Senator Borah, leader 
of the opposition to American adherence, proposed a reservation: 
“that no jurisdiction shall be exercised by or conferred upon and 
no duties or service shall be performed by or imposed upon or re- 


10 Ibid., Vol. 67, p. 2825. Senators Walsh (Mont.), Lenroot (Wis.), and Swanson (Va.), 
lead the debate in Behalf of the resolution, and Senators Borah (Idaho), Williams (Mo.), 
and Moses (N. H.), against it. Senator Pepper (Pa.) contributed most to the compromise 
finally adopted on the fifth reservation. Senators Blease (S. Car.) and Reed (Mo.), the only 
Democrats opposed to the resolution, were the main contributors to the filibuster. The 
full text of the resolution is printed at the end of this article, p. 40. 
_ The modifications of the original Swanson resolution are explained by Senator Walsh, 
Cone. Rec., Jan. 25, 1926, Vol. 67, p. 2679. The two understandings are copied from I 
ague Convention, 1907, Malloy, Treaties, Conventions, etc., Vol. 2, p. 2247. The first 
appended to I Hague Convention, 1899, and in substance to the Algeciras Convention, 
1906, ibid., pp. 2032, 2183. 


| [sn] 


: 


332 | 
: 

quired or requested of the Court other than such as now provide 
for in the statute of the Court unless the statute is amended in du 
form and such amendment ratified by every nation signatory to th 
protocol of adherence to the statute of the Court.’ He apparentl 
intended thus to bar advisory opinions altogether on the assumptio 
that the Court’s authority in thisrespect came, notfrom the statut 
but from the Covenant, though in view of Article 36 of the statut 
which expressly extends the Court’s jurisdiction to “all matter 
specially provided for in treaties and conventions in force,’’ it : 
doubtful whether the reservation would have had that effect. Thi 
was followed by a suggestion by Senator Pepper two days later whic 
seems to have led more directly to the revision of the fifth reserva 
tion. The latter assured the supporters of the Court that it could ge 
the necessary two-thirds vote if additional “safeguarding measures 
were introduced in regard to advisory opinions. ‘Through th 
right to call for these,’’ he conceived, ‘‘the Council of the Leagu 
may exercise a potent and effective influence upon the Court,” an 
“instead of, on the one hand, affirming broadly that all advisor 
opinions are desirable and, on the other, denying that any of ther 
re,’ he proposed “‘to analyze the jurisdiction and select the specifi 
points which are really of importance to the United States.’”’ Thes 
he found to be three: 


In the first place, it is now the rule and the practice of the — 
Court of International Justice to give no confidential or secret advice. — 
believe that the United States will do well, in adhering to the court, 
declare its understanding that this is a permanent and not a transi 
policy. The Court interprets itself asa court and not as a conclave; 
I think we ought to state in no uncertain terms our understanding that 
is to a court that we are adhering. 

In the second place, I think that there should be an equally expli 
declaration that the decision of the Court in the Eastern Carelia case’ 
likewise the expression of an acceptable and permanent policy; acceptabl 
I mean, to the other signatory Powers; for I suggest that it would be mos 
unfortunate if we were to leave to the chance of majority opinion with 
the Court itself the decision at a future date of a question which seems 
me to be vital to the usefulness and independence of the Court. 

In the third place, it is well to do as the fifth paragraph of the resoluti 
does, namely, announce that the United States will not be bound by 


12 Cong. Rec., Vol. 67, p. 1075. 
13 Cong. Rec., Vol. 67, pp. 1245-1246. 


[12] 


333 


dvisory opinion rendered on any question which we have not joined in 
ubmitting. I suggest, however, that we should go further, and request 
he assent of the signatories to the proposition that there shall be no ad- 
isory Opinion on any matter directly affecting the United States unless 
he United States shall have consented that the Court may take jurisdic- 
ion of that question and give an advisory opinion thereon. 

There is nothing drastic or unreasonable in any one of the three sugges- 
ions that I have made. The first two might properly be made the subject 
f reservation. They are declarations of the understanding of an existing 
tatus upon the basis of which we are moved to adhere. The third might 
roperly be a condition or amendment to be assented to by an exchange 
f notes or other appropriate method in accordance with good diplomatic 
sage. 


In the ensuing debate there seemed to be an increasing desire to 

afeguard the principle of the Eastern Carelia case by reservation, 
ind on January 14, 1926, Senator Lenroot, one of the leading spon- 
ors of the resolution, though insisting that ‘‘the Court has so con- 
trued its own jurisdiction that unless there should be a change in 
he Court the United States is fully protected with regard to ad- 
“isory opinions affecting its own interests,’’ expressed willingness to 
consider whether the fifth reservation might not be strengthened 
© prevent a change in the Court’s attitude.“ Senator Swanson 
xpressed a similar opinion on January 18.% 
Senators Borah, Moses, and others continued to oppose all advisory 
pinions,"* while there was some discussion of assuring the United 
tates a position of equality in controlling the submission of ad- 
isory opinions.” It was pointed out that this would involve a 
odification of the League Covenant, but the explanation given by 
enator Pepper in the following colloquy seems to have been ac- 
pted :38 


| Mr. WatsH. You can do whatever you please with the Court by reser- 
tion; but when you undertake to state what the Council can do and 
hat the Council can not do, then you are reforming the Covenant of the 
gue of Nations. 

‘Mr. Bora. Exactly; but where is the provision in the statute which 
ides for advisory opinions? 


M4 Tbid., p. 2046. 
15 [bid., p. 2291. 
16 [bid., pp. 2038, 2194, 2292, 2295. 
17 See Senator Pepper’s interesting remarks, Jan. 18, 1926, ibid., p. 2296. 
| 18 Cong. Rec., Vol. 67, p. 2297. 
[13 J] 


334 


Rr. WatsH. The Senator from Wisconsin (Mr. Lenroot) and the Ser 
tor from Maryland (Mr. Bruce) and myself have expressed our views abo 
that matter.19 

Mr. Lenroor. Article 36. 

Mr. Borau. The members of the Court contend that there isnoa 
thority at all in the statute for advisory opinions. 

Mr. WatsH. To what does the Senator refer? 

Mr. Borag. I refer to Judge de Bustamante’s book, and I refer a! 
to the views of Judge Moore. 

Mr. WatsH. No; the Senator cannot refer to the views of Judge Moo: 
because I have Judge Moore’s views on my desk here, and he says that t 
provisions are incorporated in the statute by reference.” 

Mr. Boran. I know that lecture; yet, nevertheless— 

Mr. WatsH. Judge Moore, then, does not state that the jurisdicti 
does not depend upon the statute. 

Mr. Boran. [assert that Judge Moore is now of the opinion that t 
sole authority for advisory opinions is in the Covenant, and I know where 
I speak. 

Mr. Watsu. I suppose there is some significance to be attached to t 
adverb in that statement, that he mow does. I can speak only from t 
public declaration of Judge Moore. I have it in my hand here. So far 
Judge de Bustamante is concerned, I cannot speak so positively abo 
that, because I have to speak from recollection; but I do not rememb 
that Judge de Bustamante discusses that subject. 

Mr. Boraw. Yes; I read it here this afternoon.” 

Mr. WatsH. However, if he does, I should differ with him; that is 

Mr. Peprrer. Mr. President, it seems to me that the colloquy wh 
has just taken place gives rise to distinctions that are rather verbal thi 
substantial. We are all agreed on certain fundamentals. One is th 
when an advisory opinion is asked by the Council of the League embarras 
ment may result from the fact that it is asked, quite apart from the questie 
of the action the Court takes upon receipt of the request. In the Easter 

19 pene Leer , Dec. 18, 1925, p. 1068; Walsh, Dec. 21, 1925, p. 1242; Bruce (Md.), ii 
5, 1926, p. I 

20 Benatar’ Walsh later Tead the following from Moore, International Law and Som 
Current Illusions, p. 114: ‘‘ The Statute as adopted by the Assembly of the League, d 
not directly mention advisory opinions; but the Court, after careful consideration, reac 
the conclusion that there were certain clauses of the Statute which by implication incorp 
rated the provision in Art. 14 of the Covenant on that subject.” Jbid., p. 2208. See 
Moore, in Publications of the Court, Series D, No. 2, pp. 385, 512; Fachiri, Permanent Cot 
of International Justice, p. 67; Wright, A.J.I.L., Vol. 20, p. 459. 

21Senator Borah seems to have referred to De Bustamante, The World Court, p. 25} 
which he had read as follows: ‘‘The Treaty of Versailles simply placed the court, fort 
creation of which Article 14 provides, at the disposition of the League asa consulting bod] 
Itis useless to argue whether the task is or is not compatible with the j udicial function or} 
assert that it compromises the Court's prestige andfuture. It isnot a question of argui 
about Article 14 but of applying it and these reasons are not strong enough to modify t 


Cong. Rec., p. 2287. This, however, does not say whether the authority of Art. 14 of t 
Covenant is direct or derivative for the Court. 


[14] 


335 


Carelia case, for instance, there was a grave menace to the peace of Europe 
in the mere submission of the request for the advisory opinion; and I appre- 
hend that if an advisory opinion were asked of the Court by the Council 
of the League of Nations in a matter affecting the interests of the United 
States and in a case where we had not consented that such request should be 
made we should have a very disturbed condition of public opinion in this 
country, and the prestige of the Court would be seriously affected, even if 
the Court after consideration were to do what it did in the Eastern Carelia 
case and refuse to give any opinion at all. For that reason, Mr. President, 
I for one strongly favor a reservation which will declare it to be not within 
the competence of the Court to give an opinion in that case, quite agreeing 
with the Senator from Montana that that will operate only upon the 
jurisdiction of the Court as a legal proposition, but being also confident 
that it will have the practical effect of leading the Council of the League 
to refrain from asking any opinion in such a case of a court which would 
have no jurisdiction to comply with the request. 

: It seems to me, Mr. President, that that is the reconciliation of the 
controversy that has just taken place. Whether we trace the origin of the 
jurisdiction to give advisory opinions to the thirty-sixth article of the 
statute, or whether we trace it to the fourteenth article of the Covenant 
of the League, in either event it seems to me that the Court ought, sofar as 
we are concerned, to be deprived of its competence to respond to a request 
for advice in any matter where we have a direct interest unless we are of a 
mind to submit the question. 


Senator Pepper’s opinion was strengthened by a memorandum 
resented by Senator Borah from a ‘‘well known international 
urist’’ whose name he was “‘not at liberty to mention”’ because he 
‘is in official life.’ This jurist thought no “prudent statesman’”’ 
ould rely on the Carelia case alone, asserted “‘ there is not the slight- 
st reason to suppose that any other country . . . would deny 
the request of the United States to be treated as an equal,” and in- 
sisted that reservation 5 in its existing form is ‘“‘worse than futile.” 
[It is based on a misapprehension because the statute does not men- 
jon advisory opinions. “It is solely from Article 14 of the Cove- 
ant of the League of Nations that the court derives it power to give 
uch opinions; and by Article 14 only the Council or the Assembly 
n ask for such an opinion. . . . It is not only opposed to the 
flictates of ordinary prudence but places the United States in a sub- 
ordinate and helpless position. This is not in the interest of the 
ourt. On the contrary it islikely to end ina catastrophe.’”’ The 
emorandum also refers to the propriety of a ‘‘reservation pro- 


fax 


336 


hibiting the giving of confidential advice,’’ and concludes with th 
following proposed reservation: 


That, in acting upon requests for advisory opinions, the Court 
shall not, under any circumstances, depart from the essential 
rules guiding its activity as a judicial tribunal but shall give 
notice and open hearings to all interested parties, and shall in 
each case freely determine, in the exercise of its own judgment, 
whether it can, in keeping with its judicial character, properly 
answer the question put to it, and what shall be the nature and 
form of its response; that in no case shall the Court give any 
confidential advice but shall announce its opinions publicly, 
together with the opinions of dissenting judges; that the Court 
shall not give an opinion on a question to which the United States 
is a party without the consent of the United States; and that 
the United States disclaims all responsibility for any opinion on 
any question to the submission of which the United States was 
not a party. 


The Swanson reservation in its final form was introduced on Jan 
uary 23, 1926,% and though incorporating the ideas of Senator Peppe 
and the unknown jurist, it appears to go farther than either, for i 
bars advisory opinions not only when the United States is “directly 
affected,’ has a “‘direct interest,” or ‘‘isa party,’’ but also wheni 
“‘claims an interest.” The source of this addition is not disclose¢ 
by the debate, though the significance of the reservation is explainet 
by both Senators Walsh and Lenroot in terms which are not wholly 
consistent with each other. Mr. Walsh thinks it gives the Unitec 
States equal power with members of the Council to control advisory 
opinions, while Senator Lenroot seems to think it merely assure: 
the United States the usual right of a state not to be subjected t 
any jurisdiction without its consent, though his use of the wore 
“‘claimed’’ goes beyond this.*4 F 


Mr. Wats. Under the Covenant of the League of Nations, each of the 
great nations has a representative upon the Council of the League; ané 
any one of them, therefore, because the Council proceeds by unanimity, 
can prevent the submission to the court of any request for an adviso 
opinion, which it does not want to have submitted. This gives to t 
United States exactly the same power by denying to the Court the aaa 
diction to entertain a request for an advisory opinion with respect to 
question concerning which the United States claims an interest. . . . 


22 Cong. Rec., Vol. 67, pp. 2293-2294. 
23 Cong. Rec., Vol. 67, p. 2656. 
24 Tbid., p. 2679. 


[16 ] 


337 


Mr. Lenroot. Mr. President, I desire to supplement what the Senator 
from Montana has said in just one respect. 

The change in reservation No. 5 merely carries out and insures and makes 
permanent, so far as the United States is concerned, the rule of the Court 
laid down by its own decision in the Eastern Carelia case; so that here- 
after, even though, as contended by the opponents of the Court, new elec- 
tions might change the complexion of the judges and a different rule 
might obtain, in no event, at any time, or under any circumstances, can 
any advisory opinion be rendered, affecting the rights or interests of the 
United States, or claimed to affect our rights or interests, without the 
consent of the United States. 

There is nothing in these reservations that is not entirely in harmony 
with the Harding-Hughes-Coolidge recommendations. 


The Senate having acted, Secretary Kellogg forwarded on March 2, 
1926, a copy of its resolution to the Secretary General of the League 
of Nations and to all the signatories of the protocol, asking the 
latter ‘‘to inform me in writing whether they will accept the con- 
ditions, reservations and understandings contained’ therein.® 
On March 18, the League Council adopted a suggestion of Sir Austen 
Chamberlain, British representative. This suggestion noted that 
since the protocol was a multilateral instrument, the American 
conditions should be embodied in a similar instrument and not 
in a series of separate exchanges of notes. Further it pointed out 
that some of the American conditions affect the rights of the present, 
signatories established by a ratified instrument which by usual 
practice could not be varied by a mere exchange of notes. Finally 
‘it drew attention to the fifth reservation which ‘‘is capable of bear- 
\ing an interpretation which would hamper the work of the Council 

and prejudice the rights of members of the League, but it is not clear 
‘that it was intended to bear any such meaning.” In view of these 
considerations, the Council’s resolution proposed that the govern- 
|ments of the signatory states inform the United States of their 
difficulties and that on invitation of the Council they all meet with 
the United States at Geneva on September 1, 1926, to arrange a new 
| agreement giving satisfaction to the United States. These invi- 
tations were forwarded on March 29, and on April 17 Secretary 
Kellogg declined for the United States because the Senate reserva- 
| tions ‘‘are plain and unequivocal, and according to their terms, they 


| 25 League of Nations, Official Journal, Vol. 7, p. 820. 
| 26 League of Nations, Oficial Journal, Vol. 7, p. 536. 


| [17] 


338 


must be accepted by the exchange of notes between the United 
States and each one of the forty-eight states signatory to the statute 
before the United States can become a party and sign the protocol.” 
He had no authority to change this procedure, saw no difficulty in 
it, and thought it would be a matter of regret if the Council ‘‘should 
do anything to create the impression that there are substantia! 
difficulties in the way of such direct communication.” He thought 
that no new agreement was necessary, but that acceptance of the 
American reservations by the signatories would constitute such an 
agreement. ‘“‘If any machinery is necessary to give the United 
States an opportunity to participate through representatives for the 
election of judges, this should naturally be considered after the reser- 
vations have been adopted and the United States has become a 
party to the statute.’’ On the other hand, he had no objection tc 
the signatories conferring.among themselves if they wished.” 

Five of the signatories (Cuba, Greece, Liberia, Albania, and Lux- 
emburg) replied that they had already accepted the American reser- 
vations, and two (San Domingo and Uruguay) favored such accept: 
ance, but forty of them (all except Brazil, Cuba, Haiti, Bolivia, 
Colombia, Costa Rica, Paraguay, and Salvador, the last five of which 
had not yet ratified the protocol) accepted the Council’s invitation, 
and the conference was held in the room of the Governing Body of 
the International Labour Office at Geneva from September I to 23, 
1926.7 

Jonkheer W. J. M. van Eysinga of the Netherlands was elected 
chairman, and M. Cesar Zumeta of Venezuela, and Sir Francis Bell 
of New Zealand, vice-presidents. Six public sessions were held, at 
which the views of the delegates were freely expressed and agreement 
in principle was reached.22 A committee of fourteen then held 
private sessions to work out a practical plan. M. Pilotti of Italy 
presented this committee’s report to the conference on September 
23.80 It was adopted after some debate and minor amendments and 


27 Tbid., Vol. 7, p. 721; Monthly Summary, Vol. 6, p. 91. i 

28 Extracts from the replies of the signatories and the other correspondence leading up to 
the conference were submitted to the members of the conference by the Secretary General on 
August 25,1926. League of Nations, Doc. C. S. S. C. 22. 

29 The present writer attended the debates and utilized the Minutes of the Conference 
of States Signatories of the Protocol of Signature of the Statute of the Permanent Court of 
International Justice, Publications of the League of Nations, 1926, v.26. (Hereafter cited, 
Minutes) for the following extracts. 

30 Minutes, pp. 52-54. The committee consisted of the President, two vice-presidents, 
M. Rolin (Belgium), Sir Cecil Hurst (Great Britain), Sir George Foster (Canada), M. 
Fromageot (France), M. Pilotti (Italy), M. Yoshida (Japan), M. Rostworowski (Poland), 
M. Osusky (Czechoslovakia), M. Unden (Sweden), M. Buero (Uruguay), M. Dinichert 
(Switzerland). Jbid., p. 51. 

[18 ] 


339 


embodied in a final act*! signed by the delegates, which each agreed 
to make the basis of its reply to the United States. This final act 
included a preliminary draft of a protocol to serve as a basis of nego- 
tiation with the United States. If satisfactory, its general signature 
and ratification would make the American reservations and the con- 
-ference’s interpretation of them legally effective. 


The conference was confronted with the tasks (1) of ascertaining. 
the meaning and effect of the American reservations, (2) of deciding 
the policy to adopt toward them, and (3) of proposing a procedure 
for effecting that policy. 

1. With the first four reservations and the first half of the fifth 

there was little serious difficulty, though a number of interesting 
points of international law arose. 

The first reservation, which guarded the United States from any 
legal relation to the League or obligation under the Treaty of Ver- 
sailles, was considered declaratory of the necessary situation of a 
non-member of the League,” and the possibility of adherence to the 
Court by a non-member is expressly foreseen by the protocol.% 


( The second reservation, which permitted the United States to 
participate in the election of judges, though perhaps raising some 
procedural difficulties, was considered wholly reasonable in princi- 
ple.*) Some expressed the opinion that it involved an amendment to 
the Covenant, but that hardly seems warranted. The powers of 
the Council and Assembly in selecting judges flow from the statute, 
not from the Covenant, which does not mention the matter at all; 
so a utilization of American delegates by the amended statute in the 
electoral process is no more a modification of the Covenant than is 
the utilization of the national groups of the Hague Court of Arbitra- 
tion in the nominating process. The common practice of enlarging the 
functions of international institutions by treaties outside of their or- 
' ganic acts and even with different parties seems not to have been fully 
understood either here or in the United States Senate.** Thus there 
ji 31 Minutes, pp. 75-88. Printed in Supplement to American Journal of International 
Law, Jan. 1927, pp. I-11. 
| 32 Remarks of M. Rolin of Belgium, Minutes, p. 11. This follows from the principle 
| that a state cannot be bound by a treaty to which it is not a party. Roxburgh, Interna- 
tional Conventions and Third States, 1917, p. 29; Wright, A. J. I. L., Vol. 11, pp. 568-575. 
| 33 Supra, note I. 
; 34 Remarks of M. Rolin and Sir Cecil Hurst, Minutes, p. I2. 
! 35M. van Eysinga, chairman, Minutes, p. 11. See also remarks by M. Dinichert of 
Switzerland and M. Erich of Finland, ihid., pp. 50, 72. 


% See Wright, A. J. J. L., Vol. 20, pp. 457-460; Minutes, 1st and 6th meetings, and re- 
marks of Senator Borah, Cong. Rec., Dec. 18, 1925, Vol. 67, p. 1075. 


[19 ] 


340 


is no need to look to Article 4, par. 5, or Article 17 of the Covenant 
for authority to enlarge the Council ad hoc as suggested by M. Rolin.*7 
Authority can be given the Council to act alone or in company with 
American representatives by the Court statute or any other treaty 
so long as the activity is within the broad competence of the Council 
and Assembly to deal with “‘any matter within the sphere of action 
of the League or affecting the peace of the world.’’8 There can be 
no doubt but that any assistance to the Court established in ac- 
cordance with Article 14 of the Covenant would be within this 
competence. 

The third reservation, by which the United States agreed to share 
in the expenses of the Court, was looked upon by the conference as a 
favor rather than a request?? and caused no discussion, though strictly 
it would appear to give the United States an advantage over other 
signatories. \ The latter’s financial burdens are “decided by the 
Assembly upon the proposal of the Council” (Art. 33), while the 
United States determines its fair share by discretionary action of 
Congress. 

The fourth reservation caused more discussion. With respect to 
the American right to withdraw, three opinions were expressed. 
Some thought the right of denunciation was to be assumed in all 
multilateral conventions, and thus the American reservation merely 
declared a right belonging to all. Others, though admitting the 
doctrine for non-members of the League, insisted that League mem- 
bers, who are bound to the Court not only by the statute but also 
by Article 14 of the Covenant, could not denounce the statute 
without withdrawing from the League.*t This argument, however, is 
weakened by the fact that the Court statute, though passed by the 
League organs, became binding for each state only upon ratification,*™ 

87 Minutes, p. 47, and comments of M. Osusky of Czechoslovakia and M. Erich of Fin- 
land thereon, ibid., p. 48, 72. 

38 ‘’There is nothing to prevent the parties from accepting obligations and from conferring 
on the Council powers wider than those resulting from the strict terms of Article 15 (of the 
Covenant).’’ Advisory Opinion in the Mosul Case, Publications of the Per. Ct. of Int. 
Justice, Ser. B, No. 12, p. 27. ‘‘Theright of the Council of the League of Nations to makea 
recommendation when requested by one or several of its members is not explicitly laid down 
in Article rr of the Covenant but isimplied, I may say by the whole Covenant.” Viscount 
Ishii, Report on the Upper Silesian Question, Minutes of Extraordinary Session of the 
Council, Aug. 29 to Oct. 12,1921, p. 7. Seealso League of Nations, Official Journal, Vol. 2, 
pp. 982, 1221,and Wright, A. J. I. L., Vol. 20, p. 458. The limits of this principle are dis- 
cussed by the writer, A. J. I. L., Vol. 20, pp. 277, 460. See also Comments by M. Dinichert 
of Switzerland, Minutes, p. 50 and infra, note 51. 

39 Minutes, p. 12. 

40M. Osusky of Czechoslovakia, ibid., pp. 12, 14. 4 

41M. Rolin of Belgium, M. Erich of Finland, and M. Pilotti of Italy, zbid., pp. 13, 14, 16. 

418 Sir Francis Bell of New Zealand and Mr. Latham of Australia seemed to think the 


Court owed its authority to the League Assembly (Minutes, pp. 55, 59, 60), but were cor= 
rected on this point by M. Pilotti (p. 61). See also infra, note 48. 


[20] 


341 


and asa result several members of the League are not yet parties to 
the Court protocol. ) Thus it is difficult to make any legal distinction 
between League and non-League members with respect to the Court. 
A third opinion, and the one ultimately accepted, held that under 
general international law a treaty cannot be unilaterally denounced, 
unless it expressly so stipulates. As neither the Court protocol nor 
statute contains a denunciation clause, as do the Hague Conven- 
tions and the League of Nations Covenant, they cannot be de- 
nounced. Thus the United States reservation, if accepted, would 
give that country a privilege not enjoyed by the present parties with 
reference to each other. Would they not, however, have that priv- 
ilege with reference to the United States under general international 
law? The Norwegian delegate thought so,“ and there seems to be 
much to support him. Treaties are presumed to be equal and recip- 
rocal. Thus courts have held that a state is not entitled to the 
privileges of a multilateral convention which by its reservation it 
refuses to others.* Is the reverse true, that a state must grant to 
others with respect to itself whatever privileges it has acquired by 
reservations? Interesting results would follow from this principle. 


©M. Castberg of Norway, ibid., p. 17; MM. Rolin and Pilotti seem to have come to 
this apiaion, gids pp. 16, 18. 

@ [bid., 

“Vattel. ie "Droit des Gens, liv. ii, sec. 301, Carnegie Endowment ed., p. 213; Hyde, Iz- 
ternational Law, Vol. 2, p. 71. ‘‘In doubtful cases that construction is to Pa adopted which 
will work the least injustice—which will put the contract on the foundation of justice and 
equity rather than of inequality.’’ Livingston, Sec. of State, to Baron Lederer, Nov. 5, 
1852, Moore, Digest of International Law, Vol. 5, p. 251. ‘‘Itis a general principle of con- 
struction with respect to treaties that they shall be liberally construed so as to carry out the 
peparent intention of the parties and secure equality and reciprocity between them.” 
Field, J., in Geofroy v. Riggs, 133 U. S. 258, 271 (1890). 

4% The Marie Glaeser, L. R. (1914), P. 218, t Lloyd, 107. This principle was specified in 
the protocol of deposit of tatifications of the African Slave Trade General Act of 1890. “‘It 
is understood that the Powers which have ratified the general act in its entirety . . 
shall not be bound toward those which shall have ratified it partially, save within the limits 
of the engagementsincurred by the latter Powers.’ Malloy, Treaties, etc., p. 1900; Miller, 
Reservations to Treaties, p. 99; Wright, Minnesota Law Review, Dec. 1919, Dp. 25, 293 Con: 
trol of Am. Foreign Relations, Dp. 51. 

46 Great Britain attached the understanding to the International Sanitary Convention of 
1903 ‘‘that the right to give notice of termination of the present convention, as also the right 
of the Powers to concert concerning amendments in the text of the convention subsists, as 
was the case with the Convention of Venice of 1897." The procés verbal of the deposit of 
Tatifications of April 6, 1907, says: ‘‘ The signatory Powers have made the following double 
declaration which is, moreover, in conformity with the stipulations containedin the Conven- 
tion of Venice of March I9, 1897,.viz.: ‘That the contracting Powers reserve the right to 
agree with one another with regard to the introduction of modifications in the text of the 
present convention and that each of these Powers preserves the right to denounce the 
present convention, which denunciation shall not have effect except with regard to it,” 
(Malloy, Treaties, etc., Vol. 2, pp. 2127, 2130.) David Hunter Miller, Reservations to 
Treaties, p. 124, comments that a comparison of these documents ‘‘discloses the very in- 
teresting fact that the declaration of Great Britain at signature, regarding the denunciation 
or modification of the convention, was adopted by all the Powers upon deposit of ratifica- 
tions and thus made generalin character. Thisis anillustration of a veryimportant prin- 
ciple, namely, that a reservation made by one Power at signature may be adopted by and 
for others upon ratification; in other words, no Power need contract with any other ona 

different from that, as ‘limited bya declaration, which the deposit of its instrument of 
Tatification will accept as to the declaring Power.”’ 


[21] 


342 


As the United States proposes to make its adherence in a separate 
exchange of notes with each signatory and reserves the right to with- 
draw that adherence, reciprocally each state which accepts the 
American adherence without qualification would have the right to 
withdraw that acceptance. But the Senate resolution declares that 
the “signature of the United States to the protocol shall not be 
affixed” until the signatories have indicated through an exchange of 
notes their acceptance of the reservations. If the United States 
signed under these conditions, what would be the effect of the with- 
drawal by one signatory of its acceptance of the American reser- 
vations? Would it mean that the President of the United States, 
acting under the Senate resolution, would have to withdraw the 
American adherence? With this interpretation the United States, 
after joining the Court, could be put out of it by the action of any 
one other party. If this would be theeffect of unqualified accept- 
ance of the Senate resolution, the drafting Committee’s proposal 
that the signatories could withdraw their acceptance by a two-thirds 
vote limits their own powers rather than those sought by the United 
States in the resolution.” 

Nevertheless, certain of the delegates felt that a counter right of 
withdrawal was one which ‘‘the United States could not accept and 
might perhaps resent.’’4* A larger number, however, agreed that 
it would be merely a natural insistence upon reciprocity. 


‘Was it reasonable,”’ said Sir George Foster of Canada, “when one party 
to this provisional agreement asked for and obtained the right to withdraw, 
that the other party, which assented to that right—an agreement in 
virtue of which the United States entered the Court—shouldn't have an 
equal right? In any transaction between nations or people it was un- 
reasonable and unjust—when a conditional arrangement was made—for 
one party to demand and obtain the right to withdraw, unless the same 
right was given to the other party. Why was it that the League of Na- 
tions, represented in that Conference, asked for the right of withdrawal 
reciprocally with the right granted to the United States? It was because 
the force and the obligation of working out its views and aims were en- 
tirely thrown upon those who were Members of the League of Nations, 
and the United States since it did not belong to the League, was under 


41Infra, note 75. 

472 See remarks of Sir Francis Bell of New Zealand who noted that his country had a 
special interest in American adhesion to the Court because its mandated territory of Eastern 
Samoa was separated by only a narrowstrait from American Samoa and the pre-war treaties 
between United States and Germany were involved; M. Franco of Dominican Republic 
and M. Zumeta of Venezuela, Minutes, pp. 55, 57- 


[22 ] 


| 


343 


none of the obligations and was not required to put forward any of the 
effort necessary to carry out the aims of the League. Now, if, in carrying 
out their work, it became apparent to the members of the League that 
the arrangement under which they were working was detrimental to their 
best efforts and to the best ultimate results which the League sought to 


_ obtain, was it not fair that, since the other side—that is, the United States 


—had the right to withdraw, the nations Members of the League should 


| have an equal right to adjust matters by a reciprocal process of withdrawal? 


ae 


ae 


SSO SESS SS 


| It seemed to him that this argument of reasonableness was a good one and 


one from which there could be no dissent.’’4”> 


A solution of this apparent disagreement was suggested by M. 
Negulesco of Roumania who distinguished between acceptance of the 


| American adhesion and acceptance of the American conditions. The 


former should be unqualified because the statute itself gave the 
United States a right toadhere. But with respect to the conditions 
the Powers might reserve the right to denounce their acceptance.*™ 
In pursuance of this suggestion the original draft of the committee 
was amended so as to give two-thirds of the signatories the right to 
withdraw acceptance only of the last part of the fourth and of the 
fifth reservations.‘"4 

The second part of the fourth reservation, prohibiting amendments 
without the consent of the United States, also called forth different 
Opinions. Some expressed a vague notion that the League Assembly 
could amend the statute,“ and others feared the United States’ 
veto would continue even if the United States exercised its right to 
withdraw.” But eventually general agreement was reached that 
under international law a treaty can only be amended by unanimous 
consent of the parties. Thus the reservation is merely declaratory 

4% Ibid., p. 58. See also remarks by M. Fromageot of France, (p. 56) M. Sjoborg of 
Sweden (p. 38) and Sir Cecil Hurst of Great Britain, who after expressing the opinion that 
Sir George Foster’s speech was ‘‘sound both from a judicial and a political point of view” 
said: ‘‘All that the States Members were asking was that there should be equality. Why 


was it impossible for the United States to accept this? He had always been under theim- 
pression that one of the principles most firmly held in the United States was the principle 


| of the equality of States. What was there unreasonable, unfair, orin any way derogatory 
| to either party in requiring that the States which had already accepted the jurisdiction of 


BE cecyord as should be put in a position of equality with the United States.’’ (p. 59.) 
id.,D. 57+ 
47d Ibid., p. 61, and changes made in texts, Pp. 77, 83. Suggestions by M. Zumeta and 


| Sir Cecil Hurst that the signatories should meet in conference before exercising their right 
| of denunciation and of Count Rostworowski of Poland that they should meet in conference 


with the United States to adjust differences which might arise over the reservations were 
tecognized to be within the spirit of the procedure accepted by the conference but though 
desirable it was thought such conferences should not be made obligatory so they were not 
enone! in the final act. (pp. 58, 61 and remarks by M. Rolin of Belgium, p. 63.) 
M. Markovitch of the Serb-Croat-Slovene State, Minutes, pp. 13, 18. 
one George Foster of Canada, Ibid., p. 13, and comments ‘thereon of Sir Cecil Hurst, 
and of M. van Eysinga of Netherlands, Ibid., pp. 15, 17. 


beg. d 


344 


of a right which the United States would, and all other parties to the 
protocol do, enjoy anyway. 

It may be noted, however, that while a treaty cannot be amended 
if any of the parties object, nothing prevents some of the parties 
making a new treaty which modifies its provisions among themselves, 
so long as they do not encroach upon the rights of the others. This 
is in fact acommon practice. The three Hague Conventions of 1899 
were all superseded by Hague Conventions of 1907 as to the parties 
to the latter. In each case, however, some of the 1899 signatories 
failed to ratify the corresponding 1907 convention, and the result is 
that those states continue bound only by the 1899 convention. This 
is simply an illustration of the principle already referred to, that the 
functions of international institutions are generally subject to change 
with respect to the agreeing states by new conventions. So long 
as treaty-making is a matter of unanimous consent and ratification, 
this principle is almost necessary if modifications are ever to be made 
at all. Suppose, the United States having adhered, a conference 
were held for modifying the Court statute. All the parties, including 
the United States, sign certain amendments. The United States’ 
reservation and general principles of international law mean that 
none of these amendments can come into effect until the United 
States and all the other parties have ratified. Experience shows 
that the prospect of getting such unanimous ratification in any rea- 
sonable time would be extremely slight.®2 Thus, some multilateral 
conventions like the League of Nations Covenant expressly provide 


50M. Osusky, M. Dinichert of Switzerland, M. Buero of Uruguay, M. Rolin, Jbid., PP. 


13-18. f 

Supra, notes 36, 38. This cannot affect the rights under the old convention of states 
that have not ratified the new one. Thus Art. 91 of I Hague Convention 1907 provided 
that this convention should replace ‘‘as between the contracting Powers’’ the 1899 conven- 
tion, Art. 31 of the Geneva Convention, 1906; Art. 4 of LV Hague Convention 1907 and 
Art. 25 of X Hague Convention 1907, provide the same and add: “‘ The convention of 1864 
(or 1899) remains in force as between the Powers which signed it and which donot also ratify 
the present convention.” See Renault’s report on X Hague Convention 1907, Scott, 
Reports of the Hague Conferences, p. 722. Seealso, Art. 11, Pan American Industrial Prop- 
erty Convention, roro; Art. 12, Pan American Trade Mark Convention, roro; Arts. 15, 18, 
Industrial Property Convention, torr; Art. 160, Sanitary Convention, 1912; Art. 13 of Act 
revising Berlin (1885) and Brussels (1890) Acts, 1919; Art. rr, Liquor Traffic Convention, 
r919; Art. 25 Arms Traffic Convention, 1919; Art. 31, Opium Convention, 1925. Asimilar 
provision was included in Art. 8 of the draft Slavery Convention of 1925 but waseliminated 
in the convention as signed in 1926 because it was thought some of the provisions of the 
Berlin (1885) and Brussels (1890) Acts might still be valuable even for parties to the new 
convention where the provisions did not conflict. See remarks of Lord Cecil, League of 
Nations Assembly, Sept. 25, 1926. 4 

52 See remarks of Viscount Cecil in Seventh Assembly of League of Nations, 6th Plenary 
Meeting, Sept. 9, 1926. An annex to the report of the Secretary General to the Seventh 
Assembly disclosed the inadequate ratification which multilateral conventions negotiated 
under the League and the International Labour Office havereceived. The same is true of 
conventions negotiated under the Pan American Union. 


[ 24 ] 


345 


or amendment by less than unanimity (Art. 26). But the Court 
tatute, like the Hague Conventions, has no such provision. Thus 
t appears that the procedure used in the latter will be followed. 
{mendments found necessary by experience will not be proposed as 
uch, but new conventions will be made which can at once become 
fective for such states as ratify them. Non-ratifying parties could 
f course object if their rights under the existing treaty were im- 
aired, and this would prevent fundamental modification by this 
rrocess, but if their rights are not impaired and the new convention 
ffects only the parties to it, there would seem to be no grounds for 
irotest. 
(The first part of the fifth reservation, which assures publicity, 
otice, and hearing for advisory opinions, merely codifies the existing 
ractice of the Court, and the provision with regard to publicity 
hich had not appeared in the original rules of court has been given 
ditional security by incorporation in the rules adopted by the 
durt on July 31, 1926 (Arts. 73-74). The conference was willing to 
ssure the permanence of these practices by treaty./ A question 
rose whether the phrase “render an advisory opinion” included 
ie Court’s deliberations as well as the announcement of its opinion, 
t the conference was convinced it did not. The usual practice of 
tivate deliberation by the Court in formulating its opinion would 
t be impaired so long as the opinion was “‘rendered”’ in public.* 
| The last part of the fifth reservation occupied the major part of 
he discussion, and three lines of interpretation were presented. 
bme thought, judging from Senator Walsh’s remarks which were 
I oted, that the United States wished equality with members of the 
uncil in controlling requests for advisory opinions.** If the Coun- 
could only make such requests by unanimous vote, the absolute 
merican veto which appears to be reserved would give the United 
‘ates no more than equality. But it was not certain that a request 
advisory opinions required unanimity. In fact some thought 
‘was a matter of procedure which required only a majority vote. 
was urged that this matter of League constitutional law must be 
‘cided before an answer could be given to the United States and 
at the Court itself should be requested to advise on it.*® Sir Cecil 
'§3See remarks of M. Markovitch, M. van Eysinga and Sir George Foster, Minutes, p. 19. 
Count Rostworowski of Poland, M. Fromageot of France, M. Rolin of Belgium, who 


ted statement of Senator Walsh, supra, note 24; and M. Pilotti of Italy, Ibid., pp. 20-26. 
65M. Rolin, ibid., p. 23. 


[25] 


346 


Hurst of Great Britain, however, pointed out that even if unanimi 
were required it could hardly be more than the qualified unanimi 
referred to in Article 15 of the Covenant, which would not give a ve 
to members of the Council parties to a dispute.** In fact, it see: 
probable that the character of the vote requesting an adviso 
opinion depends upon the character of the question asked. Ifa 
vice is asked in a procedural question perhaps the request requi 
only a majority, if on a dispute before the Council a qualified maj 
ity, and if on some other question an absolute majority.* 

A second group of speakers insisted that even if the United Stat 
formally was claiming only the same powers as a member of t 
Council, it was in substance claiming much more because of 
freedom from League responsibilities and League participatic 
Thus said Sir Francis Bell of New Zealand :8 


. . . Assuming it to be the fact that the Council must be unanim« 
in preferring a request for an advisory opinion, it was not true that on tl 
assumption the fifth reservation did not demand and grant an exceptio: 
privilege and right to the United States, for ‘‘ power’’ was not synonym«¢ 
with “‘right’’; one word was not the expression of the other. Sir Fran 
Bell did not want to use the word ‘‘demand”’ but this was a proposal | 
the concession and admission of a right to the United States to veto a 
proposal for an advisory opinion which in its opinion was inadvisable fri 
its point of view as affecting its interests. The right which it asked 
have conceded and admitted was not a right possessed by any Power n 
a Member of the Council. 

Assuming the necessity for unanimity, any Member of the Council h 
power to veto the reference of any question to the Court, but it was 1 
true that any Member had theright todoso. Suchan exercise of the por 
of veto would be absolutely contrary to the spirit of the Covenant of t 
League. The members of the Council were not there to guard the 
terests of their respective countries and to prevent the discussion of 
ters which might affect those countries; they were there to guard over 
to govern the interests of the League and of all the nations. If a St 
not at present represented on the Council were now seeking election 4 


56 Tbid., p. 24, citing request for advisory opinion of Courtin Mosul case, and rem: 
MM. F romageot, Osusky, and Negulesco, pp. 27-43. See also Wright, A. Tf L., Vol. 
p. 461, and Miller, Columbia Law Review, Vol. 26, p. 659. 

57M. Fromagect, p. 27. Seea'so M. Scialoja, CE Italy, in League of Nations Cal 
Official Journal, Feb. 1926, pp. 127-128; McNair, The Council’s Request for an Ad 
Opinion from the Permanent Court of International Justice, British Year Book of I 
tional Law, 1926, pp. I-13, who thinks arequest for an advisory opinion must be absolut 
unanimous even when it relates to a dispute on which the Council can recommend ’ 
qualified unanimity, unless the request ‘ “merely relates to the procedure or method te 
adopted by the Council in settling the dispute.”’ 

58 Minutes, p. 35. See also Sir Cecil Hurst, p. 25. 


[ 26 ] 


347 


iat country were to declare, through its representative, that, if elected, 
intended to exercise its power of veto to prevent advice being given to 
1e Council on any matter affecting the interests of that country, what 
jance would it have of being elected to the Council? If any country 
aving a permanent seat on the Council used its power of veto on the 
uestion of an advisory opinion—assuming it to have that power—in 
‘der to prevent the discussion of or the taking of a decision concerning 
atters affecting the interests of that country, it would break up the 


eague. 


It was further pointed out that the American reservation was not 
dressed to the Council but to the Court. After the Council had 
‘quested the opinion, the United States reserved the power to for- 
id the Court giving it. Thus it did not aska power equal to that of 
single member of the Council, but to the Council asa whole. That 
lis might seriously hamper League business was emphasized by 
r Cecil Hurst 59 


At the moment, any State with a representative on the Council and 
hich was in a position to vote and, thereby, to exercise a right of veto ina 
atter requiring a unanimous decision, must of necessity participate in 
e meeting of the Council and there register the vote. The great advan- 
e of this procedure was that any vote registered which might have the 
ect of exercising a veto must at least be registered after all the difficulties 
the situation had been explained, after, in fact, the representative of 
t State had had the opportunity of appreciating the difficulties attend- 
it upon the question with which the League of Nations was faced. . 

If, without participating in any way in such a meeting, the Government 
the United States claimed the right to interpose a veto in cases where 
imity was required, it would indeed be claiming a privilege which was 
different from that enjoyed by the States Members of the League. 
ich a decision would, indeed, place the United States of America in a 
ivileged position, and, in his view, it was not reasonable that the other 
es should agree to it, nor did he believe that the United States of 
erica desired it. 


‘Sir George Foster, from Canada, went even further and thought the 
6urt could not give any advisory opinion until the United States 
id given affirmative consent, which in his opinion would require 
ion by two-thirds of the Senate. Thus every request for an ad- 
‘sory opinion would be delayed until the President and two-thirds 
the Senate formally declared that the United States had no in- 
‘89 Tbid., p. 25. 


[27] 


348 


terest.° This interpretation seems doubtful. The Court cou 
assume that the United States neither had nor claimed an intere 
unless the United States made such a claim within a reasonable tin 
after the notice was sent to it. Now in American constitutional pra 
tice, the President has the sole initiative in foreign correspondenc 
Thus the American veto under the reservation could only be exe 
cised by the President. He would neither be obliged to consult t 
Senate nor to follow its advice if he did. 

A third line of interpretation which, on the whole, seems to co 
form more closely with the Senate debate, was based on the Easte 
Carelia case. Said M. Negulesco of Roumania:** 


Certain delegates at the Conference had wondered whether the Unit 
States, by its fifth reservation, would not be acquiring a preferential po 
tion as compared with the States Members of the League and Signator 
of the Protocol. It appeared to him that the question should have be 
stated differently, and that it should have been asked whether the Unit 
States had desired to claim a preferential position in comparison wi 
States which were not Members. A distinction must be drawn betwe 
States Members of the League of Nations and Signatories of the Protoc 
and States non-Members of the League which had signed the Protoc 
In virtue of Article 14 of the Covenant, States Members were prevent 
from making any opposition if the Council, when examining a dispt 
which concerned their interests, should decide to refer it to the Court 1 
an advisory opinion. On the other hand, since Article 14 of the Covena 
did not apply to States non-Members, the Court could not give an ¢ 
visory Opinion without their consent. ; 

The act of signing the Protocol could not alter that position, for : 
Statute of the Court did not refer to advisory opinions but purely 
simply to the juridical functions of the Court. . . . 

The United States, in its first reservation, had clearly specified that, | 
signing the Protocol, it did not wish to alter its position asa non-Memb 
consequently, the Court could not give an advisory opinion without | 
consent in cases in which its interests were involved. The fifth reservati 
merely confirmed the decision of the Court in the affair of Eastern Ca 
Finland, which was a Member of the League of Nations, had cited 1 
Soviets before the Council; the latter body had asked the Court for an 4 
visory opinion, but the Soviets had not wished to appear either before 
Council or before the Court. In those circumstances, the Court had ¢ 
sidered that a non-Member State could, by its opposition, prevent 


60 [bid., p. 30-31 | 
61 Miller, Col. Law Rev., Vol. 26, pp. 665-666; Wright, The Control of American For 
Relations, pp. 21-40, 279, 341. | 
63 Minutes, Dp. 43-44. 


[28 ] 


349 


urt from giving an advisory opinion. The Court had been of the opinion 
tt the pacific means placed at the disposal of the Council for settling 
ernational disputes should be accepted by the parties concerned, and 
+ consequently, if one of the parties refused its consent, the Court could 
- render an advisory opinion in a matter in which that party was 
icerned. 

[t must, however, be admitted that the wording of the fifth reservation 
ht give the impression that the United States had wished to reserve 
‘right to prevent the Court from giving an opinion whenever it was, or 
lared itself to be, interested. 

But such an interpretation could not be accepted, for the words “‘if the 
urt so decide’”’ were implicit in the text. It seemed difficult to believe 
t, at such an historic moment in the annals of the Court of International 
tice, one of the greatest Powers of the world, which was prompted by 
love of peace to adhere to the Court, should beseeking to paralyze the 
thority of the Court and to prevent it from functioning in the future. 
The words ‘‘if the Court so decide’’ would, moreover, establish equality 
ween all States and assure the normal working of the Court. 

The Conference could accept the fifth reservation if it were interpreted 
mean that the United States desired to exercise the same rights as a State 
-a Member of the League of Nations—in other words, that it wished the 
nference to confirm in its case, in a permanent form, the rule which the 
urt had once recognized in the affair of Eastern Carelia. 


With this interpretation the reservation is based on the recognized 
mciple of international law that submission of disputes to arbitra- 
m or a court is based on mutual consent. Arbitration treaties 
herally recognize it by barring cases ‘‘concerning the interests of 
d parties.’’ The difficulty of this interpretation, however, is in 
} use of the phrase ‘‘claims an interest.’”’ The Eastern Carelia 
e merely barred an advisory opinion where a state that really 
an interest withheld its consent to the jurisdiction, and the 
lurt itself would decide what states really had an interest.* As 
) Rolin said 3 


4 The opinion was expressed in the conference by M. Erich of Finland (Minutes, pp. 41, 
as it had beenin the United States Senate debate that the Carelia opinion had not been 
ly observed in the later Mosul opinion asin the latter, Turkey, a non-Member of the 
izue did not consent to the request for an advisory opinion though herinterests were 
ved. This overlooks the fact, however, that Turkey had accepted thej urisdiction of 
Council of the League for that dispute by ratifying the treaty of Lausanne, and so 
irding to Article 17 of the Covenant had ‘‘accepted the obligations of membershipin 
League for the purposes of such dispute’’ (League of Nations, Off. Journ. 1923, p. 201; 
| Dp. 1463, 1466). These obligations would seem to include acquiescence in requests 
i dvisory opinions made according to the League’s procedure. Furthermore Turkey 
Wgive a certain acknowledgement of the Court’s competence by submitting documentson 
(es though she did not send a personalrepresentative. (See Wright, ‘‘The Mosul Dis- 
h, Am. Journ. Int. Law, Vol. 20, pp. 461-462.) 
Ibid., p. 37. 
[29] 


350 


The second part of the reservation, . . . wassummed up in onesin 
word, ‘‘claims.’? The United States—if its reservation were taken lit 
ally—was asking not only for the right to intervene and to claim that 
interests were concerned but that the mere fact of its intervention and 1 
mere declaration that it had an interest in the question should be suffici 
to compel the Court to declare itself incompetent without even consider 
how far the claim and this declaration of incompetence were justified. 

It was at this point that it was necessary to consider whether it 1 
possible to gosofarasthat. Sir George Foster, in his very striking spee 
had pointed out that, as a matter of fact, the request of the United Sta 
was not addressed to the Council nor to the Assembly but to the Cot 
and that the United States was requesting the Court itself to refuse to g 
an advisory opinion if the United States declared that it had an inter 
in the question referred to the Court. It was manifest that, stated in t 
form, the request of the United States would indisputably give that co 
try a privileged position, since none of the States Members of the Lea; 
was entitled to claim that the Court wasincompetent solely on the grot 
that the State in question was interested in the matter which had b 
submitted by the Council. All that the States could do was to add 
arguments in favor of one or other solution of the question submitted 
the Council to the Court. 


The paragraph of the Senate resolution following the fifth res 
vation related only to procedure, and raised no question of princij 
though there seemed to be general recognition that acceptance of 
reservations would in fact modify the statute of the Court with 
pect to all the parties, and this could only be effected by a ratil 
instrument. 

The two concluding paragraphs related to the constitutional 
petence of the President and Senate and the foreign policy of 
United States. They apparently were thought to have no effec 
the rights and duties of the other parties and were not discussed 
the conference, although the Senate resolution appears to make 
tacit, if not express, acceptance a condition of adherence.® 

2. The attitude of the various states toward the American r 
vations can only be judged from the debates, the report of the 
mittee, the resolutions finally adopted, and to some extent from 
vate conversation with the delegates. Three points stood out. | 

All of the delegates were anxious to have the United States a 


64 They are called understandings rather than reservations, but to be legally effective} 
would have to be accepted by the other parties to the treaty. Wright, Minn. Law 
March, 1919, pp. 16-18; Control of American Foreign Relations, pp. 45-52. ] 


[30 ] 


351 


co the protocol, as it would increase the prestige and value of the 
Court, though some were willing to make more concessions than 
thers.*° There was also a general realization that it would be 
solitically difficult to get the United States Senate to modify its 
-esolution. 

None of the delegates were willing seriously to interfere with the 
present working of the Court and the League. The advisory proce- 
jure was considered valuable and there was no inclination to weaken 
t.686 The small states especially looked upon the advisory jurisdic- 
tion as a protection, and some of them hoped that resort to it by 
majority vote of the Council might prove to be the practice. 

Finally there was an extreme reluctance to create special priv- 
leges. Some of the delegates were thinking of the probable adhe- 
sion of Germany to the protocol in the near future, and perhaps 
sventually that of Russia. If special privileges were given to the 
United States, it would be hard to refuse them to others. This point 
of view was emphasized by the representatives of the large states.* 
| Was it possible to reconcile these policies with the American reser- 
yations? Four plans were suggested. M. Rolin of Belgium proposed 


70 ascertain precisely the powers with respect to advisory opinions 
yf the members of the Council before answering.®* Sir Cecil Hurst 
of Great Britain proposed an interpretation of the reservations in the 


65 The small states, especially the Latin American states, seemed most anxious to have 
United States adhere. The Pilotti committee reported: ‘‘The greater the number of 
tates which have acceded to the Court the greater willbe the Court’sauthority. Itisto 
the interest of the States which founded the Court that all the other States of the world 
hould agree to become parties thereto even if they feel unable to become members of the 
eague of Nations. In particular, the possibility of the accession of the United States of 
America, as a state mentioned in the Covenent of the League of Nations, was provided for 
i the Protocol of Signature of the Statute of the Court. It therefore seems quite natural 
lhat the States signatories of the Protocol, in the presence of a proposal—even a conditional 
roposal—by the United States of America to accede to the Court, should adopt a favorable 
ttitude,’’ Minutes, p. 53. 

66 At the meeting of the Federated League of Nations Societies at Aberystwyth, Wales, 
July, 1926, anxiety was displayed by several speakers at the possibility of weakening the 
yeague and the Court’s procedure. See League of Nations News, New York, August, 1926, 
.10. The Final Actsaysinrelationtoreservation 5: ‘‘Greatimportanceisattached bythe 
members of the League of Nationsto the value of the advisory opinions whichthe Court may 
ive as provided forinthe Covenant. The conference is confident that the Government of 
jhe United States entertains no desire to diminish the value of such opinionsin connection 

ith the functioning of the League of Nations. Yet thetermsemployedin the fifth reserva- 
ion are of such a nature astolend themselves to a possibleinterpretation which might have 
hat effect. The members of the League of Nations would exercise theirrightsin the Coun- 

land in the Assembly withf ullknowledge of the details of the situation which had necessi- 
ated a request for an advisory opinion, as wellas with full appreciation of the responsi- 
ilities which a failure to reach a solution would involve for them under the Covenant of 
he League of Nations. A state whichis exempt from the obligations and responsibilities 
if the Covenant would occupy a different position.’’ 

67 In regard to requests for advisory opinions where the United States is not a party, 
he Pilottireport said, ‘‘ The reply canonly consist ina declaration by the Signatory States 
ecognizing the United States of America asenjoying equality with the States Members ofthe 
eague represented in the Council or the Assembly,’’ Minutes, p. 54. 

68 Minutes, p. 23. 

[31 ] 


352 


sense of equality with members of the Council.6® M. Unden of Swede: 
proposed a counter-reservation giving the signatories the right t 
withdraw acceptance of the American adherence in case a satisfac 
tory procedure for the exercise of the American powers under th 
fifth reservation could not be agreed upon,” and M. Casteberg o 
Norway endorsed the idea but thought the result would follow fron 
general principles of international law without an express reserva 
tion.74 Finally, a proposal to negotiate an executive agreemen 
establishing a procedure to ascertain the American opinion on ; 
proposed request for an advisory opinion before the Council ha 
decided upon it, was published in the Geneva press by Mr. Theodor 
Marburg, former United States Minister to Belgium, and con 
sidered by the conference.” 

It was concluded that the terms of the American resolution, what 
ever may have been its real intent, carried such grave possibilities o 
weakening the whole institution of advisory opinions that it couk 
not be accepted without some safeguard. This safeguard was foun 
in an interpretation according to the British proposal and a counter 
reservation according to the Swedish proposal.’* With these safe 
guards the Senate resolution was accepted. The interpretatior 
applied only to the fifth reservation, and that was accepted unequiv 
ocally so far as it related to requests for advisory opinions in whick 
the United States had an interest, but in so far as it related to ad 
visory opinions in which the United States only claimed an inter 
but did not, in the opinion of the Court, really have one, the effec 
would not necessarily be a veto, but precisely the effect of an adver. 
vote by a member of the Council or Assembly. Thus the Unit 
States was in reality given a privilege beyond that enjoyed by eithe| 
members or non-members of the League, because it would have th 
powers of both. It would have the power of members in controllin 
court action on advisory opinions in which it had no interest, am 
also the right of non-members to prevent Court action in ca 
where it had aninterest. This latter power does not belong to mem 
bers of the League because by acceptance of Article 14 of the Cove 
nant they have agreed in advance to permit advisory opinion 

69 Ibid., p. 24. | 

70 Tbid., p. 36. 

11Ibid., p. 4I. 

72See League of Nations News, New York, Aug. 1926, pp. 8-10, and statement by 


van Eysinga, Minutes, p. 45. 
73 See report of M. Pilotti and Final Act, ibid., pp. 52-54, 75-88. 


[32.4 


353 


properly requested by the Council or Assembly. Even a member 
_ of the Council, if it is a party to the dispute, is by that very fact 
deprived of an effective vote in controlling requests for advisory 
opinions.“* An interest in the case which assures a non-member a 
veto deprives a member, whether permanent or ad hoc, as in the case 
of Turkey in the Mosul case, of a veto. 

As a protection against the possible unreasonable exercise of the 
special privilege given the United States, M. Unden’s suggestion was 
adopted. A counter-reservation permits each signatory to with- 
_ draw its acceptance of the second part of the fourth and the fifth 
_ reservations, with the effect of terminating the protocol of American 
_ adherence if such action is taken by two-thirds of the parties other 
_ than the United States within a year. This seems no more than a 
fair reciprocal application of the American power to withdraw, and in 
fact is perhaps less than international law would have given without 
express reservation.” 

The Spirit of the Conference was summarized in the concluding 
remarks of its president, Jonkheer van Eysinga of the Netherlands:7* 


_ The United States when expressing its desire to adhere to the Statute of 
the Permanent Court of International Justice, had made its adherence de- 
pendent upon a stipulation which might very appreciably affect the efficient 
working of the League of Nations, to which they all belonged and whose 
interest they ought all to have at heart. . . . The case was that of a 
legislative act by a foreign state concerning a question which was outside 
its competence. It had also been difficult to draw up the reply because 
the Conference had not been able to discuss the matter with representatives 
of the United States; international matters required to be dealt with inter- 
nationally. This was true also of any act which was so eminently interna- 
_ tional as an adhesion with reservation toa convention. . . . The delegates 
had not for one moment forgotten that they had been summoned to Geneva 
| for a great purpose: to endeavour to give satisfaction to the United States, 
and in so doing to make it possible for that country to share in the work of 
the Court of Justice and make it easier for that country to resume its 
noble mission—the course of which had been somewhat interrupted—in 
the pacific settlement of international disputes. . . . Another point 
brought out by the debates had been that the constitutional difficulties 
which had been encountered had been far more serious than was perhaps 
| suspected in the United States when the reservations were drawn up. The 


74 Supra, note 56, but see supra, note 57. 
78 Supra, note 47. 
758 Minutes, p. 64. 


[33 ] 


: 
354 | 
Conference had, however, endeavoured to reduce these difficulties to a 2 
minimum, and to span what was left of them by a bridge which the United — 
States had only to pass over to meet them. He hoped that the United 
States would take the course which had been indicated. It would then be 


able to resume the place which belonged to it by right in the pacific settle- 
ment of international conflicts. 


3. The procedure for effecting these proposals was not considered 
at length in the public debate, but occupied much attention in the 
committee. 

There have been cases where reservations to multilateral conven- 
tions presented on deposit of ratifications have been tacitly accepted,” 
but generally they have been expressly accepted.” Thus the Ameri- 
can request for express acceptance is not unreasonable and was 
recognized by the signatories. 

Greater difficulty, however, was presented by the question of 
ratification. Could the American reservations be accepted by the 
signatories without resubmission to their ratifying authorities? It 
was thought not. They in fact modified the terms of the statute. 
Thus it was considered necessary to draw up a special protocol for 
general signature and ratification by the usual process. The sug- 
gestion was made that the modifications should be incorporated in 
the statute itself, but it was pointed out that this would raise new 
difficulties in case the United States should ever exercise its right to 
withdraw.” 

Though it was thought the reservations could only be accepted by 
a ratified document, formulation of the procedure for American exer- 
cise of the powers there given was left to executive agreement. It) 
is the usual practice to leave the details of treaty execution to un- 
ratified agreements or exchanges of notes,®° and Secretary Kellogg, 


76 A reservation to The I Hague Convention, 1907, made on deposit of ratifications by the 
United States, seems to have been accepted tacitly. Wright, Minn. Law Rev., 1919, D. 23; 
Control o fAmerican Foreign Relations, pp. 48-52; Miller, Reservations to Treaties, D. 1455, 
Scott, Reports to The H ague Con ferences, pp. xxvii-xxviii. Some multilateral conventions 
expressly forbid reservations. This was true of the Declarations of Paris (1856), and of 
London (1909). Wright, Control of Am. For. Rel., p. 49. 

77 Wright, Minn. Law Rev., Dec. 1919, pp. 21-22: Miller, Reservations to Treaties, p. 160 
eee ae to Multilateral Conventions,” British Year Book of Valonntiona 

aw, 1920, p. 159 

78 Where reservations or interpretations have not been accepted by the full ratifying au- 
thority of one party, their validity has often been questioned, as was true of diplomatic 
interpretations of the Treaty of Guadaloupe-Hidalgo (U. S.-Mexico, 1848) and the oo 
Bulwer Treaty (U. S.-Great Britain, 1850). Wright, Minn. Law Rev., Dec. 1919, D. 22; | 
Control of American Foreign Relations, p. 48; Miller, Reservations to Treaties, pp. 80-87. 

79 Sir Cecil Hurst, Minutes, p. 49. 

80 Wright, Control of American Foreign Relations, pp. 106, 236; Crandall, Treaties, Their 


Making and Enforcement, pp. 117-120. 


[ 34 ] 


355 


in his letter of April 17, 1926, had suggested that consideration of 

“machinery to give the United States opportunity to participate 

through representatives for the election of judges’ be deferred 

until the United States had become a party to the statute. Though 
the signatories seem to have found no need for supplementary agree- 
ment on this matter, they did on the matter of advisory opinions. 

Because of the non-participation of the United States in the ordinary 

work of the Council and Assembly, they attached great importance 

to the manner in which the United States gave its consent to ad- 
visory opinions, and suggested that this should form the object of 
an understanding between the United States and the Council of 
the League ‘‘which would ensure that the peaceful settlement of 
future differences between members of the League of Nations would 
- not be made more difficult.’’8!_ This understanding could be reached 
by executive agreement. 
_ Comparing the Senate debates and the debates and Final Act of 
_ the conference, there seems to be little separating them. There is 
_ nothing in the Senate debate to indicate that the United States as 
_a non-member of the League wishes to interfere with advisory opin- 
ions where it has no interest. Certain Senators, it is true, opposed 
advisory opinions altogether, but they were a small minority. The 
_ desire of the majority apparently was only to protect the interests of 
_ the United States asa non-member. Thus, the issues are: What is 
an American interest? and What authority will decide whether a 
particular claim of interest if founded? 

The United States undoubtedly has an interest in the protection 
of its rights. An opinion which might affect American territory or 
property, an American officer or citizen, or the reputation and good 
name of the United States, would clearly involve an American in- 
terest. The United States would in fact be a party, and, under the 
_ Eastern Carelia case, American refusal to appear would bar an ad- 
_visory opinion. The Final Act says, with respect to cases where the 
United States is a party, ‘‘the jurisprudence of the court as formu- 
lated in this case seems to meet the desire of the United States,” 
but apparently the Senate wished to give this jurisprudence the 
additional sanction of a treaty.% Since the signatories manifested 
no objection to the principle of the Eastern Carelia case, they would 

81 Final Act of the Conference, Minutes, p. 79. See also par. 1, of Art. 4 of the draft 


protocol, and par. 8 of the Pilotti committee’s report, tbid., pp. 54, 83. 
82See remarks of Senators Pepper and Lenroot, supra, notes 13, 24. 


[35 ] 


356 


probably be willing to incorporate it in the proposed protocol. 
This could be done by adding a paragraph at the beginning of Article 
4 of the proposed protocol in somewhat the following language** 


Even in giving advisory opinions, the Court shall not depart 
from the principle of international law that no state can, without 
its consent, be compelled to submit its disputes with other states 
to any kind of pacific settlement. 


The United States also has an interest in certain traditional poli- 
cies such as the Monroe Doctrine. Here it would be more doubtful, 
but the general acceptance of the second understanding in the Sen- 
ate’s resolution would give the United States a good chance to prove 
its interest to the Court if the facts really involved the Monroe 
Doctrine.™ 

Finally, the United States, along with all other states, doubtless 
has an interest in the interpretation of international law and treaties 
to which it is a party. But most advisory opinions would require 
some such interpretation. Thus, if the United States claimed an 
interest under such circumstances, and its claim barred an opinion, 
it would destroy the institution of advisory opinions altogether. 


83 This is believed to contain the essence of the following language of the Court: “‘It is 
well established in international law that no state can, without its consent, be compelled to 
submit its disputes with other states either to mediation or to arbitration, or to any other 
kind of pacific settlement. Such consent can be given once and for all in the form of an 
obligation freely undertaken, but it can, on the contrary, also be given in a special case 
apart from any existing obligation. The first alternative applies to the members of the 
League who, having accepted the Covenant, are under the obligation resulting from the 
provisions of this pact dealing with the pacific settlement of international disputes. As 
concerns states not members of the League, the situation is quite different; they are not 
bound by the Covenant. The submission, therefore, of a dispute between them and a 
member of the League for solution according to the methods provided for in the Covenant, 
could take place only by virtue of their consent. . . . The Court isaware of the fact that 
it is not requested to decide a dispute, but to give an advisory opinion. This circumstance, 
however, does not essentially modify the above considerations. The question put to the 
Court is not one of abstract law, but concerns directly the main point of the controversy 
between Finland and Russia, and can only be decided by an investigation into the facts 
underlying the case. Answering the question would be substantially equivalent to deciding 
the dispute between the parties. The Court being a court of justice, cannot, even in giving 


advisory opinions, depart from the essential rules guiding their activities asa court.” Pub- | 


lication of the Per. Ct. Int. Jus., Ser. B, No. 5, pp. 27-29. In giving a decision on the claims 
of Costa Rica and Salvador that Nicaragua had violated their rights by concluding the Bry- 
an Chamorro Treaty with the United States, the Central American Court of Justice seems 


to have neglected this principle, because the United States, whose treaty rights would — 


clearly be effected by the decision, had not submitted to the jurisdiction. For the Court’s 
argument for assuming jurisdiction, see A. J. I. L., Vol. 11, pp. 212, 699, and Ralston, 
International Arbitral Law and Procedure, 1926, pp. 149, 152. The Court did, it is true, 
refrain from declaring the nullity of the treaty ‘because that would be equivalent to ad- 
judging and deciding respecting the rights of the other party signatory to the treaty with- 
out having heard that other party and without its having submitted to the jurisdiction of 
the Court” (ibid., Vol. 11, pp. 228, 729), but apparently givingany decision at all did not, 
as suggested by the unknown jurist (supra, note 22), prove to the interest of the Court, but 
ended in a catastrophe for it. 

& Apart from the second understanding attached to the Senate resolution, the Monroe 
Doctrine is specifically referred to in Article 21 of the Covenant. See Wright, “‘The dis- 
tinction between legal and political questions with especial reference to the Monroe 
trine,”’ Proc. Am. Soc. Int. Law, 1924, pp. 61-67. 


[36 ] 


—_~ 


357 


Such a claim would, however, stretch the term interest far beyond its 
usual meaning in such a context as this. Such a meaning clearly 
cannot be intended by the arbitration treaties which bar ‘‘cases 
concerning the interests of third parties,’ nor has it been accepted by 
the Court. 

But suppose the United States does claim an interest on this ground, 

as it might if the question related to the scope of the domestic juris- 
diction of some State in immigration or tariff control. Even if the 
Court refused to recognize this as an interest barring the opinion 
under the Eastern Carelia case, the conference’s interpretation of the 
reservation would bar the opinion in cases where the request of the 
Council or Assembly can only be made by unanimous vote, and the 
question whether it is absolute or qualified unanimity would not be 
important, for if the United States were a party and its vote were 
excluded in counting qualified unanimity in the Council,® that very 
fact would make its veto absolute as a non-member under the 
Eastern Carelia case. Thus the only requests for opinions on which 
the American veto would not be effective are those in which a ma- 
jority of the Council or Assembly can make the request. If there are 
any such cases, they are probably only those dealing with procedure 
within the League of Nations,’ in which the United States, as a 
non-member, could hardly claim an interest. 
_ Should it prove, however, that a mere majority can request an 
advisory opinion on other questions, the United States would doubt- 
less be at a disadvantage. Influence may be exercised by measures 
ther than a vote as has been pointed out by M. Raul Fernandes of 
razil, one of the jurists who drafted the Court’s Statute.8* 


It would be useless to deny, that certain members of the League of 
ations have sufficient prestige to keep at least the Council, if not the 
Assembly, from taking up and deciding a question, if or when they doubt 
the expediency of doing so. Even if such a nation were in a minority at 


| 85See arbitration treaty, United States-Great Britain, 1908. In the Wimbledon Case the 
Permanent Court of International Justice distinguished between Articles 62 and 63 of the 
Statute, both of which permit a state to intervene in proceedings, the first if it can prove to 
the Court’s satisfaction ‘‘an interest ofa legal nature,’’ and the second if it isa party toa 
lreaty to be construed by the Court. Presumably only interveners of the first type could 
top proceedings, under the principle of the Carelia Case, by refusing to submit to the juris- 
fBetion because under Art. 59, the second type of interveners are not bound by the construc- 
ion and so their rights are unaffected unless they intervene. Publications of the Per. Ct. 

f Int. Jus., Ser. A, No. 1, p. 13. 

86 Supra, note, 56. 

87 Supra, note, 57. 

872 See Fernandes, The United States and the Permanent Court of International Justice, 
. from French and published by the American Foundation, 1927. 


[37] 


358 


first, it is very likely that the other nations would yield to the arguments 
they bring forth, or would prefer to postpone a decision. As a matter of 
fact, this is the way things are done, and it would be disastrous if they were 
done differently; the Council is strong only when its members can reconcile 
their different points of view, and its usefulness consists precisely in facili- 
tating such agreement through the personal contacts and the continued 

conversations that are possible only at Geneva. This being the case, the 

situation proposed to the United States, as affording a theoretical equality, 

would be as follows: the United States government, from a distance, 

could oppose its futile vetoes on proposals agreed on at Geneva; while 
certain other nations on the scene would retain their means of sidetracking 
the proposals that seemed troublesome to them. 


M. Fernandes, however, does not fail to point out that, while 
the United States would be at a disadvantage with only formal 
equality of vote (in case a majority suffices to request an advisory 
opinion), it would be at an advantage if given an absolute veto, and 
as was pointed out in the conference of signatories, this advantage 
would exist even if unanimity were required. While an important 
minority in the Council might dissuade a majority from exercising 
its power, on the other hand an important majority might dissuade 
one or two states from exercising a veto. | 


The powers which the American government asks for in connection with 
advisory opinions on questions where it is not a party but where it claims 
an interest, do amount to a privilege. Not, however, in the sense that the 
United States would be the only nation to possess these powers, as we hay 
shown, but because, though the other nations have the same powers i 
fact if not in law, they would, as members of the League of Nations, a 
use of these rights only with full consciousness of their responsibility for 
the work of that institution. So far as they are concerned, there is an 
automatic sanction attached to the use of such a power which would 


effectively prevent any abusive use of it. | 


Thus M. Fernandes proposes a compromise that the League 
“formally admit that a request for an advisory opinion is one of 
those questions for which a unanimous vote is necessary” while the 
United States accept the signatories’ reservation of a right to with- 
draw their acceptance of the fifth American reservation. j 


“While it is just,’’ he says, ‘‘and also of the greatest interest political y 
that they (the signatories) should remove the greatest obstacles now exist- 
ing to the adherence of the United States to the Court, by admitting the 


[38 J 


359 


justice of the American demands, which we believe we have shown to be 
legitimate, nevertheless, they cannot for whatever gain, deprive themselves 
of the means for safeguarding the League of Nations, without which, more- 


over, the Court itself would still be only an ideal pursued in vain.” 


In addressing the American Society of International Law on 


April 28, 1927, former Secretary of State Hughes commended M. 


Fernandes’ proposal, though he did not specifically refer to the sig- 


natories’ right of withdrawing their acceptance. 


“Tt would be fortunate, indeed,’’ he said, ‘‘if such a means could be 
found of deliverance from the present impasse and if the United States 
without sacrificing, the interests which are cherished by our people, might 


be able to give support to the practical application through a permanent 
‘tribunal of the principle of judicial settlement of international disputes, 
a principle to which this Government has been, and continues to be, 


firmly attached.” 


Although the conference of signatories accepted all the American 
reservations ‘‘in principle,” as recommended by the Pilotti com- 
mittee, and introduced but slight modifications in their application,%”” 
these modifications are probably sufficient to require a new submis- 
sion to the United States Senate. This would naturally take the 
form of submitting the proposed protocol for its advice and con- 
sent, but before such submission, negotiations would seem desirable 


‘in order to perfect the instrument, especially by incorporating the 


principle of the Eastern Carelia case. Such negotiations might be 
carried on by individual correspondence with each of the signa- 
tories, or by summoning a new conference at which the United 
States would attend. 

President Coolidge, however, said on November I1: 


8’b The Greek representative whose government had already accepted the American 


| adhesion in principle agreed with this interpretation: ‘‘After carefully reading the Final 


Act and after hearing the clear statement of the Rapporteur and the debates which have 
taken place in the Conference, I am glad to find that the conclusions reached by the Con- 
ference amount to an acceptance in principle of the United States reservations, subject to 
certain details of procedure. The President stated this morning that the Governments 
were in no way committeed. In these circumstances, I am prepared to sign the Final Act.” 
(Minutes, p.63.) 

88 Former Secretary Hughes said in his address of April 28, 1927, ‘‘The question having 
thus been raised the response of the Conference of signatories that unanimity may not be 
necessary in requesting advisory opinions has created a new situation, as adherence of 
the United States on these terms would require an explicit approval on the part of the 
Senate of an understanding that advisory opinions might be requested over the objection 
of the United States touching such disputes and questions in which the United States 
claims aninterest.’’ In 1800,after Napoleon had made a counter-reservation to the Senate’s 
reservation to the treaty of amity and commerce, President Jefferson eventually decided 
that the treaty would have to be resubmitted to the Senate. Malloy, Treaties, etc., vol. 
I, Pp. 505; Hayden, The Senate and Treaties, pp. 123-124; Miller, Reservations to Treaties, 
PP. 13-14; Wright, Control of American Foreign Relations, p. 45; note 77. 


[39] 


360 


While no final decision can be made by our government until 
final answers are received, the situation has been sufficiently 
developed so that I feel warranted in saying that I do not intend 
to ask the Senate to modify its position. I do not believe the 
Senate could take favorable action on any such proposal, and 
unless the requirements of the Senate resolution are met by the 
other interested nations, I can see no prospect of this country 
adhering to the Court. 


On December 7, 1926, soon after the assembling of Congress, 
Senator Trammel of Florida who had voted in favor of the Senate’s 
resolution of January 27, 1926, introduced a resolution to rescind 
it because ‘‘a very large majority of the powers signatory to such 
protocol have not indicated their acceptance of it.” On December 
19, this resolution was submitted to the Foreign Relations com- 
mittee and in spite of efforts of Senator Trammel it never came out. 
On February 9 the latter’s motion to consider his resolution on the 
floor was tabled by a vote of 59 to 10. Senator Borah explained 
that ‘‘the matter was working itself out to a final conclusion,” 
that ‘‘the indications seemed to be that the governments will not 
accept the reservations,’’ that it would be impossible to get a vote on 
the Trammel resolution in the brief time remaining, and that he 
thought the opponents of American adhesion to the protocol werg 
‘rather well satisfied’? with the situation.®®* 

With the United States committed to the policy of a world court by 
long tradition®® and to joining this Court by planks in both major 
party platforms, by presidential utterances and by resolutions of both 
houses of Congress,” it would seem surprising if it allows its policy 
to be frustrated by the slight margin of disagreement which remains 
without further negotiation. 


J 

RESOLUTION OF UNITED STATES SENATE ADVISING AND CONSENTING TO 

ADHERENCE OF THE UNITED STATES TO THE PERMANENT COURT OF INTER- 
NATIONAL JUSTICE, JANUARY 27, 1926. 


Whereas the President, under date of February 24, 1923, ecimeuaee 
a message to the Senate, accompanied by a letter from the Secretary of 
State, dated February 17, 1923, asking the favorable advice and consent 
of the Senate to the adherence on the part of the United States to the pro- 
tocol of December 16, 1920, of signature of the statute for the Permanent 


882 69th Cong., 2nd Sess., Sen. Res. 282, Cong. Rec., Vol. 68, DD. 37, 119, 3228, 3327. 
89 See letter of Secretary of State Hughes, supra, note 2. Y 
90 Supra, notes 3, 5, 7, 10. 

[ 40 ] 


361 


Court of International Justice, set out in the said message of the President 
(without accepting or agreeing to the optional clause for compulsory juris- 
diction contained therein), upon the conditions and understandings here- 
after stated, to be made a part of the instrument of adherence: Therefore 
be it 

Resolved (two-thirds of the Senators present concurring), That the Senate 
advise and consent to the adherence on the part of the United States to 
the said protocol of December 16, 1920, and the adjoined statute for the 
Permanent Court of International Justice (without accepting or agreeing 
to the optional clause for compulsory jurisdiction contained in said statute), 
and that the signature of the United States be affixed to the said protocol, 
subject to the following reservations and understandings, which are 
hefeby made a part and condition of this resolution, namely: 


1. That such adherence shall not be taken to involve any legal relation 
n the part of the United States to the League of Nations or the assumption 
of any obligations by the United States under the Treaty of Versailles. 

2. That the United States shall be permitted to participate through 
representatives designated for the purpose and upon an equality with the 
other states, members, respectively, of the Council and Assembly of the 
League of Nations, in any and all proceedings of either the Council or the 
Assembly for the election of judges or deputy-judges of the Permanent 
Court of International Justice or for the filling of vacancies. 

3. That the United States will pay a fair share of the expenses of the 
Court as determined and appropriated from time to time by the Congress 
of the United States. 

4. That the United States may at any time withdraw its adherence to 
the said protocol and that the statute for the Permanent Court of Inter- 
national Justice adjoined to the protocol shall not be amended without the 
consent of the United States. 

5. That the Court shall not render any advisory opinion except publicly 
after due notice to all States adhering tothe Court and to all interested 
States and after public hearing or opportunity for hearing given to any 
State concerned; nor shall it, without the consent of the United States, 
entertain any request for an advisory opinion touching any dispute or 
question in which the United States has or claims an interest. 

The signature of the United States to the said protocol shall not be 
affixed until the powers signatory to such protocol shall have indicated, 
through an exchange of notes, their acceptance of the foregoing reserva- 
tions and understandings as a part and a condition of adherence by the 


United States to the said protocol. 
a of this act of ratification that the United 


States approve the protocol and statute hereinabove mentioned, with the 
understanding that recourse to the Permanent Court of International 


[41 ] 


362 


Justice for the settlement of differences between the United States and 
any other State or States can be had only by agreement thereto through 
general or special treaties concluded between the parties in dispute; and 

Resolved further, That adherence to the said protocol and statute hereby 
approved shall not be so construed as to require the United States to de- 
part from its traditional policy of not intruding upon, interfering with, or 
entangling itself in the political questions of policy. or internal adminis- 
tration of any foreign State; nor shall adherence to the said protocol and 
statute be construed to imply a relinquishment by the United States of its 
traditional attitude toward purely American questions. (Cong. Rec., Vol. 
67, Pp. 2306; Sem. Doc. 45, 69th Cong., Ist sess.) 


[42] 


363 


SIDELIGHTS ON THE PERMANENT COURT OF 
INTERNATIONAL JUSTICE! 


[Reprinted from Michigan Law Review, Vol. XXV, pages 327-353, February, 1927.] 
BY AKE HAMMARSKJOLD 


Registrar of the Permanent Court of International Justice 


In bidding you welcome, in the name of the Permanent Court of 

International Justice, in this room where that great institution holds 
its public meetings and pronounces its judgments and opinions, my 
first word should be, I think, one of regret—regret that a more 
worthy representative of the Court has not been able to receive you 
here today. And I daresay that the President of the Court, who 
would have been the obvious person to welcome you, shares those 
regrets,—although perhaps from a different point of view. He would, 
in fact, have liked immensely to be able to meet you here and on 
this occasion; indeed, I received just five minutes ago a wire from 
him asking me to convey to you his best wishes for the success of 
your visit to The Hague and for the whole of your trip. Still more, 
before leaving The Hague, Dr. Huber asked me to tell you, and 
that I think is a most eloquent sign of his sincere wish to make your 
acquaintances, that he would very much appreciate it if he could 
see you in his native city of Zurich some time early in September in 
order to explain to you, not so much perhaps certain aspects of the 
working of the Court, as certain sides of the fundamental structure 
on which the Court and international jurisdiction in general are 
based. 
But my next word should be one of gratification that it has fallen 
to my share to receive you. Itis really a very great pleasure to make 
the acquaintance of so many colleagues in the field of international 
law, and to be able to renew the acquaintance already made with 
certain of them—whom I may perhaps even call my friends,—and 
whom I met, I think, last time at Geneva. 

I must say that I am particularly happy to meet them again at 

1An address delivered before the European Conference of American Professors of Inter- 
national Relations at the Peace Palace at The Hague, August 11, 1926. (The footnotes 


mainly reproduce answers to questions put by the audience; some such answers have 
been worked into the report of the address.) 


[43] 


364 


The Hague. For it is ever so much easier to talk about the Court 
at the place where its seat is established, and where that atmosphere 
of the Court prevails which makes all explanations and also the real 
spirit of the institution appear in their true light. 

It is true that today that atmosphere is very far from being com- 
plete, the Court not being in session. Thus, you will not be able to 
see the judges hurrying to the Peace Palace one by one to attend 
the meetings; you will not be able to see them leaving the Palace in 
small groups, of twos or threes, talking and gesticulating; you will 
not be able to see your own fellow countryman, Judge John Bassett 
Moore, and Lord Finlay making their way through the woods to 
their hotels. You will not be able to watch the bee-hive of industry 
which the Palace is when the Registry is at full work, when advo- 
cates and agents and diplomatic representatives of the parties fill the 
rooms and corridors. And, above all, you will not see the Court 
sitting up there in their austere robes, facing the advocates, some- 
times wigged and gowned as you would see them in Anglo-Saxon 
countries 

It is precisely because this atmosphere which I am presenting 
to you is to a certain extent lacking at the present moment that it 
may be useful that I should try and supplement by word of mouth 
what you cannot see with your own eyes. In order to do so, in 
order to try and be of use to you in that respect, I think the best way 
would be for me first to tell you something of the things of which 
you do not read in books, and then to place myself at your disposal 
for answering, to the fullest extent of my powers, any questions 
which you might like to put to me. 


* *# 


If you agree, I will start by saying a few words on how the Court 
works when it meets in private to discuss its judgments and its 
opinions. 

Of course, you are all conversant with the salient features of the 
Court’s organization. You know that it consists of fifteen judges, 


four of whom are deputies, and eleven of whom are regularly sitting.” 


2 Under the Statute, a complete renewal of the Court is to take place at the expiration of 
every period of nine years. Re-elections are, however, admitted. It is impossible to ex- 
press any opinion on the value or disadvantage of the rule until it has had an opportunity 
of being applied in practice. It is, for instance, obvious that if a considerable number of 
judges are, in fact, re-elected, the effect will be very much the same asif mandates were 
overlapping. If, onthe other hand, an entirely new Court is selected, it remains to be seen 
whether the Registrar’s experience and established practice will suffice to ensure the 
necessary continuity, 

[44] 


365 


You know that the Court holds at least one annual session a year and 
that it may hold extraordinary sessions, the number of the latter in 
fact having outgrown that of the former. You know that the Court 
possesses one responsible official, the Registrar, and that it is as- 
sisted by a Secretariat called the “Registry’’. You know that there 
are certain relations between the Court and the League of Nations. 
But it may interest you to hear something about how the various 
parts of the machinery work together inside the machine when it 
is in motion. 

Cases and questions to be considered by the Court are, as you 
know, submitted to it under requests of various kinds: requests for 
advisory opinions emanating from the Council or from the Assembly 
of the League of Nations; applications for judgments, by virtue of 
a clause of compulsory jurisdiction, emanating from one party only; 
and special agreements concluded between the two parties to a 
conflict asking the Court to settle the dispute by a judgment. As 
soon as a demand, belonging to any one of these categories, arrives, 
it is at once circulated to all the States of the world; in the case of 
requests for advisory opinions, it is also notified to international 
organizations considered to be concerned in the matter. When itisa 
question of an application calculated to lead to a judgment, time 
limits are then fixed for the filing of the documents of the written 
procedure and for the opening of the oral proceedings. When, on 
the contrary, it is a question of a demand for an advisory opinion, 
the Court decides—or the President, when the Court is not in ses- 
sion,—what States or international organizations should be con- 
sidered as ‘‘concerned,’”’ and these States or organizations are noti- 
fied that they will be admitted, upon request, to furnish written or 
oral information. Upon the receipt by the Court of requests to be 
so admitted, time-limits are again fixed, precisely as in a case which 
is to be settled by a judgment. 

It may be interesting to note, in passing, that the difference in 
procedure which I have just indicated is the only difference between 
the procedure concerning contested cases on the one hand and con- 
cerning advisory opinions on the other: in the latter case, thus, 
time-limits are not fixed until requests to be admitted to furnish in- 
formation are forthcoming: but once such time-limits are fixed, the 
advisory procedure follows exactly the same line as the contentious 


[45 ] 


366 


procedure.* This is the result of the Court’s practice and jurispru- 
dence during the last four years; and if it was not expressly laid 
down, when the Rules of the Court were first drawn up, that there 
was to exist such an assimilation of the two classes of procedure 
before the Court, this is now made clear in the revised edition of the 
rules which came into force on the last day of July of this year. 

When the procedure has been gone through from one end to the 
other, when all the documents have been filed, and when the oral 
arguments have been completely stated, the Court withdraws 
to consider its decision or its opinion; but, in doing so, it is careful 
not to declare the hearings closed, because it desires to reserve to 
itself the possibility of continuing them, if necessary, in order to 
put questions to the parties or to the interested States. On several 
occasions it has in fact made use of this possibility. 

The first thing that happens when the doors of the private meeting 
room of the Court have been closed behind the judges is for them to 
proceed to an informal exchange of views on the case or question 
at issue. This exchange of views is not calculated to permit the 
judges to express any opinion, however non-committal and provi- 
sional, on the merits of the problem before the Court, but merely to 
underline what, in the opinion of the various judges, are the salient 
features of the case, what are the questions to be solved, and what 
are the points on which it would seem to be particularly necessary 
to know the individual views of the various judges. 

Once this first discussion is finished, a time-limit is fixed within 
which the judges must file a note containing their complete and con- 
sidered individual opinion on the case as a whole. These notes are 
distributed anonymously, being unsigned and bearing only numbers. 
Two or three days after their presentation, the President circulates to 
his colleagues a summary of all the various opinions systematically 

8A further difference—not of procedure but of organization—between contested cases 
and advisory opinions lies in the fact that, when dealing with the latter, the Court dispenses 
with the presence of the ‘‘national judges’’ ad hoc provided for,as concerns contested cases, 
in Article 31 of the Statute. The theoretical foundation for this difference no doubt is that 
any exceptions as regards the Court’s normal composition under Article 25 of the Statute 
should not be applied outside the domain within which they are expressly provided for. 
Advisory opinions being dealt with only in Article 14 of the Covenant, exceptional composi- 
tions not mentioned in that Article—such as are arrived at by means of the Rules govern- 
ing the technical and summary chambers and the addition of national judges—could not 
therefore be extended to advisory opinions. 

It has happened only in one advisory opinion (Mosul) that one of the interested States 
but not the other had a judge on the bench; in all other cases, either all or none of the States 
concerned have had a judge on the bench. But, from the experience gained in one single 


case, no final conclusions can be drawn as to the value of the rule, especially when that 
single case happened to be of a very exceptional character. 


[ 46 ] 


367 


arranged, so as to constitute at the same time a kind of question- 
naire, permitting the Court to settle by successive preliminary votes 
not only the solution at which the majority wishes to arrive on each 
of the points at issue, but also what are the main arguments to be 
adduced in the statement of reasons in support of these conclusions. 
Then—sometimes only after a very long and laborious discussion,— 
the necessary votes are taken, and a committee is appointed to draft 
the decision. It is composed, besides the President and the Regis- 
trar, of two judges elected ad hoc by secret ballot. This Drafting 
Committee sets to work according to a method which is not always 
the same but which varies according to the nature of the cases. 
Sometimes, the members of the Committee agree to draw up a de- 
tailed plan in order afterwards to entrust the drafting to one of its 
members only, subject to criticism and amendment by the other 
members. On other occasions, the decision seems to be able nat- 
urally to be split up into sections, one of which can be drafted by 
each member of the Committee, subject to the same reservations. 
In fact, the introduction and statement of reasons are always pre- 
pared by the Registrar. 

The draft, when once completed, is then circulated to all the 
members of the Court and a time-limit is fixed for the presentation 
of amendments, if any. Upon receipt of these amendments, the 
Drafting Committee again sets to work in order to settle what amend- 
ments can be accepted, what amendments it feels it must dissuade 
the Court from adopting, and in some cases to do the whole draft 
over again in the light of the observations made by the other mem- 
bers of the Court. Sooner or later, however, what may be con- 
sidered as the final report of the Drafting Committee is ready, and 
it is then discussed by the full Court, first generally, and afterwards 
paragraph by paragraph. This discussion may lead to the rejection 
of the whole draft, so that the same procedure must be started all 
over again; but more often than not, it results in the adoption by a 
final vote, and subject only to minor drafting amendments, of a 
text, which will eventually become the opinion or the judgment of 
the Court. 

The question is often raised whether the fact that the judges 
come from so many different countries and are trained under legal 
systems which sometimes differ so much does not make the work of 
the Court particularly difficult. I am glad to have this opportunity 


[47] 


368 


of saying that however that may be, one thing is certain, namely, 
that the shock which does take place between opinions based on 
different legal systems and on different legal training is the source 
of a great completeness of consideration and a guarantee for the 
all-sided and impartial character of the final decision or opinion. 
Of course, this situation may lead to difficulties. It is obvious that 
it is far easier to agree between people who, by reason of their very 
education and their very origin, are likely to hold the same views; 
but if this Court were to be composed in a manner offering such 
facilities, it would be immensely impoverished as compared with 
what it is today. 

Another question is often heard: Can the Court, when its burden 
of work increases as it is bound to do, continue to apply the same 
elaborate system of discussion as is now followed? Of course, it is 
difficult, even impossible, to give a definite answer to this question; 
but I think I may be able to say that an effort will have to be made 
and will be made to maintain the essential features of the system in 
order to enable the Court to take full advantage of the different 
origin of its members and of the differences existing between the 
legal systems under which they have all been trained. 

The facts to which I have just referred, of course, sometimes have 
the effect of preventing judgments or opinions from being unani- 
mous. The Statute itself provides that decisions of the Court are 
to be taken by a majority, and it goes even further in the same 
sense in giving dissenting judges the right to add to the judgment 
a statement of their dissenting opinions. The ensuing system has 
been much criticized, and I have even been asked whether the Court 
itself does not dislike it, and whether it is not possible to abolish it. 
My answer must be that since it is a question of a provision of the 
Statute the Court’s opinion on it is of little importance: the Court 
has to apply it and cannot disregard it. Severe criticism was voiced 
when, in 1920, the rule was enacted, and it may be expressed again 
if the Statute is one day revised—although not by the Court. A 
different question altogether is that the Court should apply the pro- 
vision in question not only according to its letter but also according 
to its spirit. This is why, amongst other things, when the Court 
revised its Rules the other day, it inserted a provision according to 
which any judgment or advisory opinion is to state the number of 
judges composing the majority by which the judgment or opinion 


[48 J 


369 


yas adopted. In fact, the right to publish dissenting opinions being 
ptional and not obligatory, it may happen, and it has indeed hap- 
ened, that in cases where several judges voted against the judg- 
nent or opinion, one only filed a dissenting vote, thus creating in the 
ainds of the public the impression that the judgment or opinion was, 
nanimous, save for that single vote. Now, in the view of the Court, 
his is not in accordance with the spirit of the provisions of the 
tatute to which I have alluded, and, therefore, the Court has 
nacted an amended rule intending to bring the practice into con- 
ormity with that spirit. 

It is not, however, an easy task always precisely to define what 
his spirit is. In this matter which I am just discussing, two ex- 
reme solutions are possible between which a wide field is open for 
ompromise. One is to consider the Court as a moral whole—a 
ingle person—whose decisions, although taken by a majority of 
he members composing the Court, are the sole and indivisible de- 
isions of that moral entity. The other extreme is the solution 
ccording to which the judgment called ‘‘the judgment of the Court”’ 
3merely the conclusion in which the majority of a series of individual 
udgments delivered by each member of the Court happen to concur. 
‘he first system is generally applied on the Continent; the second is 
ound in its purest form in the United Kingdom. The Court’s Statute 
as adopted a solution which is a compromise between the two 
xtremes just indicated, and this fact is eloquent enough as concerns 
he difficulties met with on this particular point—not by the Court— 
ut by the bodies entrusted with the preparation of the Statute. 
Ss a matter of fact, the Continental solution is adopted in so far as 
he judgment is signed only by the President and the Registrar. 
in the other hand, what I may call the Anglo-Saxon solution is 
dopted in so far as dissenting opinions, which are a kind of echo of 
he several individual judgments known to English law, are admitted. 
n determining what is the spirit of the Statute, the problem consists 
1 Saying to what extent one solution or the other prevails, and where 
ne dividing line between them goes. I have just mentioned what is 
2e Court’s view on one aspect of this important matter. 

Returning now to the question of procedure from which I started— 
hen once the judgment or the opinion has been finally adopted, with 
t without dissenting votes, it is made public in this room and com- 
lunicated to those interested and to the press. And so the ship 
launched. 


[49 ] 


370 


This is an important act. Perhaps few realize how important i 
is. For it is fraught with the fate not only of the interests at staki 
on the specific case at issue, but to a large extent also with the fat 
of the Court itself, and, indirectly, with that of international juris 
diction generally. A judgment or an opinion delivered by the Cour 
passes sentence not only on the conflicting claims of the parties or o1 
the arguments put forward in support of this or that point of viey 
on a given problem, but also on the Court’s claim to the confidence o 
the States and of the general public. The Court is the greatest ex 
periment ever tried in the field of international jurisdiction; shoul 
it fail, or be considered to have failed, the cause of internationa 
jurisdiction in general will no doubt be compromised for a considera 
ble time to come. I would like you to fully realize what a very grav 
responsibility towards humanity at large therefore rests upon thi 
men who have had imposed on them the terrible task of performing, 
duty as a member of this Court. 

But, on the other hand, if the Court succeeds in gaining genera 
confidence, its beneficial effects will extend far beyond the limit 
of the cases or questions actually submitted to it. One of your grea 
statesmen, who is moreover intimately connected with the history 
of the Court, Mr. Elihu Root, in an article which he published some 
what recently, drew attention to the fact that the importance of th 
Court lies, at least to some extent, in preventing cases. coming befor 
it, as well as in solving cases having come before it. Mr. Root meant 
I do not doubt, that the very existence of the Court induces thi 
parties to try to come to an agreement rather than risk the non 
success of a bad case before the Court, and that the mere fact that 4 
conflict may come before it is often enough to make a party whic 
feels that it has no strong case go to the other litigant and say “‘le 
us settle this matter reasonably between us.’’ But this will o 
viously happen on one condition only, and that is, that Government 
have an absolute conviction that if a case is brought here, the trut 
and the full truth will be brought out, and that justice and ful 
justice will be proclaimed. As concerns the situation in this respec 
at the present moment, I am able to inform you that I have positiy 
knowledge of a certain number of cases which have been solved bj 
direct agreement between the parties as soon as those parties wer 
faced with the necessity of coming here and having their real right 
and wrongs proclaimed. 


[50 ] 


| 


| 371 


| All the States of the world have an interest in the good working 
if the Court, and may criticize it from the point of view just referred 
o, for it is open to all of them and on a footing of perfect equality. 
(here is a rule in the Statute to the effect that nothing may be done 
vhich might encroach upon the perfect legal equality of parties be- 
ore the Court. In this respect, a question may be raised. It may 
e asked whether it is not true that the Statute provides for special 
onditions as regards States wishing to appear before the Court and 
yho are not members of the League, and, if this is so, whether this 
loes not introduce an element of inequality. The answer is simply 
hat the conditions in question, far from creating an inequality, are 
alculated to ensure perfect equality. As you know, the members 
f the League of Nations are bound by an engagement, undertaken 
1 the Covenant, to the effect that they are to carry out in full good 
uith the decisions of the Court. The condition placed on the ad- 
uission of other States is in fact merely that they should make a 
eclaration to the same effect. Even that condition does not how- 
ver, apply to all States which are not members of the League, but 
nly to such States, not being members of the League, as are not 
lentioned in the Annex to the Covenant. Consequently, the 
Inited States amongst others, is not debarred from coming before 
2e Court by any condition, but finds itself in a more favorable 
osition even than any member of the League. But then what is 
le use, it is sometimes asked, of the United States adhering to the 
ourt? Here you will excuse me for refusing to answer: my do- 
lain is that of law, not that of politics. Again, it is often asked, 
hether the principle of equality can really be said to extend to ad- 
isory opinions if, as would appear to be the case, such opinions can 
nly be demanded through the instrumentality of certain organisms 
f the League, the Council or the Assembly; or whether perhaps 
quality may be here established by allowing any two States to con- 
ude a treaty between them’ by which they agree to ask the Court 
4 an advisory opinion, such agreement compelling the Court to 
ct in conformity with it. My answer is that there cannot be a 
uestion of any inequality since non-Members of the League are also 
erfectly entitled to ask the Council or the Assembly to transmit 
) the Court a request for an advisory opinion. But, on the other 
and, I think that that is the only channel through which such a 
quest can legally reach the Court. The source of the Court’s com- 


C5] 


372 


petence to give advisory opinions is to be found in the last phrase of 
Article 14 of the Covenant,a provision that may be considered as 
incorporated in the Statute, which expressly mentions it both in it 
preamble and in its first article, by reference. I understand that tk 


is competent to decide all cases which the parties thereto refer to it 
and all matters specially provided for in treaties and conventions in 
force. But to my mind, Article 36 refers only to cases which are 
to be solved by means of a judgment, and does not refer to questions 
submitted in the advisory procedure.’ The history of the clauses if 
question would seem to be conclusive in this respect, and even if i 
were not, there is, in two judgments already delivered by the Court 
a strong indication that in the view of the Court itself it could ne 
deliver advisory opinions except upon requests formally emanatini 


6 and 7 concerning certain German interests in Polish Upper Silesia 
The defendant in that affair raised an objection to the Court’s jur 
diction to deal with a certain conclusion of the claimant because th 
conclusion was alleged to constitute in reality a request for an ad 
visory opinion, and because the Court was said not to be able to giv 
such opinion except as provided for under Article 14 of the Cove 
nant. The Court held, in its Judgment on the jurisdiction, that th 
conclusion in question was intended to ask the Court to pass judg 
ment and not to deliver an opinion, and, for this reason, the Cour 


4The difference between ‘‘cases’’ and ‘‘matters’’ (French: “‘affaires”’ et ‘‘cas’’) in 
provision would seem to me to be two-fold: first, that the Court has jurisdiction to decid 
on the one hand, all disputes submitted to it by virtue of an agreement between the parti 
concluded specifically in order to settle the individual dispute in question, and, on the o 
hand, all disputes concerning subject-matters which, by a treaty stipulation, the pa 
have in general agreed to consider as falling under the Court’s jurisdiction; second, th 
disputes belonging to the second category can, under such treaty stipulation, be submitt 
by unilateral applications (cf. Article 40). The first distinction coincides with that dra’ 
by Lammasch between ‘‘isolated’’ and ‘‘institutional’’ arbitration; the second adds 
in the event of ‘‘institutional” arbitration no special agreement is necessarily requii 
the unilateral application being looked upon as a notification of the agreement (compromi 
generically involved in the compromissory treaty provision. i bi 

6 This opinion would lead to a negative reply also to the question whether the Court co ul 
not acquire competence to give advisory opinions at the request of international bod 
other than the Counciland the Assembly, by virtue of a provision in the organic conventi 
establishing such body. For organic conventions subsequent to the Statute could not” 
incorporated by reference in the Statute, except by amending the latter. Moreover, 4 
ticle 36, relating as it does only to contested cases (leading up to judgments) could not b 
directly applied to advisory opinions. A kind of authentic interpretation of the Statut 
in this sense was, finally, given by the first Assembly when, notwithstanding the very wit 
wording of Article 423 of the Versailles Treaty, it refused the right to ask for adviso 
opinions to the International Labour Organization, except through the intermediary of | th 
League. | 

[52] 


373 


maintained its jurisdiction also on this point. Further, in the Judg- 
ment on the merits, the Court, recalling this fact, stated that, in the 
proceedings on the merits, the claimant had failed to formulate def- 
mite claims calculated to establish the character of the conclusion in 
juestion as an application for a judgment on the point at issue, and 
the Court, therefore, left that conclusion on one side. 
_ This leads me on to another problem, which is often discussed: Is it 
tue or is it not true that the Court can refuse to give advisory opin- 
ons? My answer is simply: it is true!’ The Court not only can 
yut has actually refused to give advisory opinions. More than 
that, it has drafted one article of its Rules in terms which are ex- 
sressly calculated to indicate that the Court does not feel compelled 
n all circumstances to give effect to requests for advisory opinions; 
| refer to the opening words of Article 74 of the Rules as drafted in 
922: “Any advisory opinion which may be given by the Court, 
te. . .. ” Ontheother hand, it is equally certain that the Court 
ill not refuse to give an opinion for which it has been asked, except 
r imperative reasons of paramount importance. I am glad to be 
ible to give an instance of what such reasons may be. I am thinking 
wf the so-called Eastern Carelian question on which the Court 


. refused to give an opinion. It is sometimes said that this 


appened because Russia refused to appear before the Court. This 
true, but it is not the whole truth. The theory on which the Court 
cted was as follows: The Court has compulsory jurisdiction only in 
ases with regard to which the parties have by general or special 
greement consented that the Court should have such jurisdiction. 
eing limited in character, the compulsory jurisdiction of the Court 
‘an, therefore, in no circumstances be introduced through any back- 

oor, for instance that of advisory opinions. Now, what happened 
ln the Carelian case was this: Finland submitted to the Council of 
e League a point which was the subject matter of an acute con- 
oversy between that country and Russia. The application of 

inland to the Council was a unilateral one, Russia not agreeing to 


| ®On the other hand, I do not think that the Court could refuse to give judgment ona 

se regularly submitted toit for decision. It has been asked whether this might not hap- 
n, for instance, when the circumstances of the case are such that a decision might affect 
€ rights or interests of States which have not consented totherequest. I donotthinkso, 
| hainly in the light of Article 59 of the Statute, limiting the binding force of the decision to 
| ne litigant parties and to the specific case; thus, if third States do not intervene, the deci- 
| on cannot legally affect their rights and interests. Anindication in the same sense is to 
found in Article 63 of the Statute which, indirectly, renders the Court’s interpretation of 
provision of a collective treaty inapplicable to a State which has participated in the treaty 
t which has not ‘‘interyened”’ in the proceedings, 


[53 ] 


374 


bring the dispute before the League. The Council asked the Cou: 
for an advisory opinion on the very point of which it had itself bee 
made cognizant. The Court, therefore, was indirectly seized of 
matter by a unilateral request and its answer, if given, would hay 
decided the point at issue between Finland and Russia. If it he 
been a question of a contested case, the Court would have had 
jurisdiction to deal with it unless both parties had accepted its juris 
diction as compulsory. It could not, therefore, through the rounc¢ 
about way of a request for an advisory opinion, assume jurisdictio 
over the case at the demand of one of the parties only, in the absene 
of an agreement establishing compulsory jurisdiction. The absene 
of such agreement could have been remedied by Russia putting in a 
appearance before the Court, or by her specifically consenting tha 
the Court should give an opinion. Her action, however, was quit 
to the contrary, because she refused to appear before the Court. 
is in this sense that it is true that Russia’s failure to appear caused th 
Court to refuse to give an opinion. For if Russia had put in an aj 
pearance it could, by virtue of the consent implied, have made w 
for the absence of compulsory jurisdiction. But the real reaso 
for the refusal was that no such jurisdiction existed. 

As you know, advisory opinions are delivered by the full Cour 
the same as is usually done in ordinary cases for judgment. But yo 
also know that provision is made for the creation of special Chambers 
one for labour cases, one for transit and communication cases, ant 
one for summary procedure. Of the working of the two forme 
Chambers, no experience has been gained, since there has been 
business for them.’ a” 

The Chamber for summary procedure, on the contrary, has beel 
working in two instances; and I may mention that the procedu 
according to which it works, has been extended by the revised Ru 
of Court, so as to apply also to the full Court when deciding 


7No special procedure is provided for the bringing of cases before the so-called ‘te 
nical chambers.’’ Whether the full Court or a Chamber is to sit, the matter is broug 
before the Court in the same way, i.e. by the filing of an application or by the notificat 
of aspecialagreement,asthecase maybe. Butifthespecialagreement, orthe comprom 
sory clause on which the application relies, contains a statement to the effect that the Col 
“sitting asa Chamber for * * * ’’ isto decide, this Chamber will be convoked and w 
in the first place, be seized. If, on examination, it finds that the parties were not inf 
agreed to ask the Court to decide the case otherwise than in pleno, it will so advise 
Court, who willthus be competent. i c 

The two technical chambers are organized according to the same principles, except 
the presence of technical assessors, compulsory when the labour chamber is sitting, ist 
quired as concerns the transit and communications chamber only at the request of # 
parties or if the Court itself feels the needs of expert technical advice. 


[54] 


* 


375 


to the jurisdiction and on similar preliminary objections. At 
e same time, somewhat more detailed rules about this procedure 
jave been inserted, mainly for the guidance of the parties. 


* * * 


Subject to the further questions which you may like to put to me, 
will now abandon the working of the Court as such and advert 
another essential factor in the preparation of the Court's judg- 
ents and opinions, a factor which, being less conspicuous, is little 
own,—less than certain other institutions of exactly the same 
category,—but which is nevertheless an instrument of international 
peration well worthy of a closer examination: I mean the 
istry. 
The origin of the Registry is as follows. When, early in 1922, 
e Court met for its Preliminary Session, held in order to enable it 
a prepare its Rules, the Secretary General of the League, under a 
special Resolution of the Assembly, designated one of the officials 
f the League with the necessary staff to act as Secretary and Sec- 
tariat to the Court until the Registrar, provided for in the Statute, 
aad been appointed and until the Court had had the time to consti- 
te its own Registry. As a matter of fact, after a few days, the 
fficial designated by the Secretary General was elected Registrar, 
d was instructed by the Court to prepare plans for the organization 
f the Registry; meanwhile, the staff designated by Geneva con- 
inued to act. 
The terms of reference of the Registrar were very strict. He 
to draw up a plan of organization providing for a complete and 
fficient secretariat, comprising the smallest possible number of offi- 
jals and costing the smallest amount possible. In fact, the Court 
tself, at that time, did not feel sure whether the amount of its work 
uld be great or small, but it was certainly inclined to think that 
t would not be overwhelming; and, this being so, it wanted to avoid 
e ridicule of having a considerable staff walking about The Hague 
ithout much to do. The result was that the Registrar prepared 
co. of organization very much on the lines of the armies of those 
otic countries whose military forces are said to consist only of 
enerals. In fact, what he devised was a small secretariat, every 
ember of which would be responsible for a specific department so 
to make it possible to extend the staff according to the require- 


[55] 


if 


376 


ments of the work, without changing the framework of the organiza 
tion, and I think I may be allowed to say that the experiment he 
been successful. The Registry has proved itself entirely up to it 
task, and at the same time, essentially elastic, a contributing facto 
to this happy result being no doubt the fact that we are able as: 
rule always to fill temporary posts, as required, with the same people 
who are, therefore, from the moment they set foot on the premises 
more or less acquainted with the task before them. . 

In the course of time, the Registry has undergone certain modificé 
tions. As it now is, it comprises a number of departments which 
with your permission, I shall describe one after the other. 

But, first of all, I should mention a post which was created onl 
a few months ago, and which, in a certain sense, falls outside th 
framework of the rest of the organization: the post of Deputy 
Registrar. The duties attached to this post are, in the first place, 
the name indicates, to replace the Registrar in case of his absene¢ 
But, at the same time, the Deputy-Registrar is responsible for lege 
research work and has to look after a part of the diplomatic corre 
pondence of the Registry. You are perhaps astonished to hear tl 
expression ‘diplomatic correspondence” used in connection wi 
legal institution; but in reality there is nothing extraordinary abo 
this. The Court’s customers—so to say,—the parties permitte 
to appear before it, are States only; and the result is that, practice 
speaking, in every case on which the Court has to give judgment 
even an advisory opinion, extensive pourparlers of a purely diph 
matic character, mainly on points of procedure, take place betweer 
the Registry and the representatives of the interested States. : 
same fact, namely, that the Court is open only to States, necessitates 
a great deal of other correspondence which, although not diplomati¢ 
in character, requires perhaps no less tact; I mean correspondenct 
with private individuals who would like to appear as parties befor 
the Court. To all of them,—and at present we have had, I think 
hundreds of applications of this kind—we eventually have to opposi 
a categorical non-possumus. In some cases, however, I must admi 
that I rather resent this necessity, especially those in which applica} 
tions come from persons having no nationality. There are, for im 
stance, persons who were born in Germany and who have, unde 
German law, lost their German nationality after the expiration of; 
certain lapse of time and who, having settled down in France ar 


[56] 


377 


refused French citizenship, because in the eyes of the French law 
‘they are still Germans. Such persons, in fact, cannot avail them- 
selves of the possibility which is open to the citizens of any State, to 
have their case tried by the Court, by obtaining from their Govern- 
ment that it introduces, in the interests of the private person con- 
cerned, a suit before the Court against another Government. This 
possibility is, so far, the only remedy to the situation which excludes 
‘private persons from the Court; it, at the same time, imposes a neces- 
ey check on the ambition and ardor of private litigants by com- 
pelling them to obtain their Government’s consent to take the mat- 
ter in hand. The Court has declared in its Judgment No. 2 that a 
suit becomes international in character, even if the principal interest- 
ed is a private person, provided it is taken up by a Government; but, 
on the other hand, a suit not so taken up which interests only a 
private individual, is irremediably kept outside the Court. 

_ To revert to the organization of the Registry, I next want to say 
a few words about the principal officials of the Registry properly so 
icalled, namely the three ‘‘editing secretaries.” All of them belong 
to the category, which in the Geneva hierarchy, are known as ‘“‘Mem- 
\bers of Section, Class A”’, whilst, for instance, the Deputy-Registrar 
‘belongs to the category known as “Chiefs of Sections” and the 
Registrar is assimilated to that of “‘ Directors.” 

One of these Secretaries is responsible for what we understand 
here by “‘drafting’’; besides that, he acts as Secretary, not to the 
/President personally, but to the President as an institution, if I may 
say so, to the ‘‘Presidency.’’ The ‘‘drafting”’ for which that Secre- 
tary is responsible consists in reality of editing, namely, the editing 
‘of two of the series of the publications of the Court about which I 
shall speak to you later, and of the so-called ‘Confidential Bulle- 
tin” of the Court. The two series which are entrusted to him are 
Series D, chiefly containing the texts of clauses conferring jurisdic- 
tion on the Court, and Series E, being the Court’s Annual Report. 
The Confidential Bulletin is less known. It is a document com- 
municated exclusively to the Members of the Court who receive it 
‘twice monthly. It is calculated to constitute a kind of permanent 
tie between the Members, both in their personal relations and as 
concerns their work. It, therefore, contains information concerning 
the activities of the Members of Court, but also and above all any 
information which can be obtained concerning events of direct or 


| [57] 


378 


indirect interest to the Court. Such events may consist of happen: 
ings in the political world. They may consist of judgments render 
by national or international tribunals. They may consist of Pr 
comments on the Court’s own work, and so forth. The Bulletin in 
this connection is really intended to keep the judges fully acquaint | 
with all the problems which may one day come before the Court, sc 
that if a request or an application arrives relating to one of these 
points, a judge may have in condensed form—the Bulletin is very 
carefully indexed—all the information which he immediately needs 
in order to form an idea of the nature and importance of the ques: 
tion submitted. You may ask why this Bulletin is so strictly con: 
fidential? The reason, of course, is that it is not desirable that i 
should become generally known what cases are considered by the 
Registry as likely to be brought before the Court: this, in tacll 
might have the most undesirable political side issues. 
The task of the second editing Secretary is entirely different in 
character. He is mainly responsible for oral translation. Su 
translation takes place in part in public, namely, at the hearings o 
the Court; in this respect the Secretary concerned is, of course; 
assisted by other interpreters. But in part it takes place at t 
private meetings of the Court; there the Secretary to whom I a 
referring generally works alone, because the Court admits to its 
private meetings only the Registrar, the Deputy-Registrar, and one 


the interpreter just be entirely conversant with the point under dis. 
cussion; otherwise he would be quite inadequate. For these reasons, 
the Secretary in question is obviously particularly qualified, not only 
for the interpretation work itself, but also for the preparation of 
the minutes of the private meetings and for the editing of the docu: 
ments relating to cases and questions, in other words, for the edit! 
ing of the publications belonging to Series C. And this is why 
is responsible also for these two branches of the activities of the 
Registry. a 4 

The third editing Secretary is entrusted with the written trans: 
lations which are both numerous and voluminous. He, of course 
has the right to be assisted by his colleagues and by temporary trans 
lators, especially when it is a question of translations into a la ny 


[58 ] 


379 


guage other than hisown. It should be noted that this Secretary, as 
well as his colleagues, are supposed to possess, besides a thorough 
knowledge of French and English, a working knowledge of German 
and Spanish. But even so, it has been found that we are not quite 
adequately staffed from a language point of view, and sooner or later 
we shall have to contemplate the addition to the Registry of a person 
possessing a knowledge of the Slav languages. When that has 
‘been done, we shall be fairly universal so far as foreign languages 
go. 

Another important department of the Court,—in fact the one 
which was most difficult to plan and organize,—consists of the Ar- 
chives, with which are combined the distribution service of the 
Court and the Court’s own library of reference books. The prin- 
cipal care of the Registrar, when organizing this branch, was to in- 
troduce a system permitting one to find any document or reference 
at the shortest possible notice, and my experience is that he has 
been successful on this point. Perhaps this is due to a large extent 
to the fact that he eventually chose a system which he had adapted 
from one which he had had the opportunity of studying in your 
country, and more particularly in Washington, D. C. 

The next department is that of accounting and establishment. 
What the duties belonging to it are I need not explain because that 
tesults from its very name, but I should like to take this opportunity 
of giving a few explanations concerning the financial administration 
of the Court. 
You will remember that there is an article in the Statute according 
to which the expenses of the Court are to be borne by the League 
of Nations in the manner decided by the Assembly. Under this rule, 
‘the Assembly has taken two successive resolutions: according to 
the first, the Court’s budget was to be incorporated with the League’s 
budget; and, under the other, the Court was to be a financially 
autonomous institution in the sense given to that expression by the 
“financial regulations” of the League of Nations. This means two 
things: first, that the Court approves its own budget as drawn up 
_ by the Registrar for submission to the Assembly without any inter- 
ference by the Council or the Secretariat of the League of Nations; 
secondly, that the Court has a right to obtain out of every contribu- 
tion paid by Members of the League towards the funds of the League, 
a share corresponding to the proportion which the Court’s budget 


[59] 


Ae 


380 


bears to the League’s budget as a whole. In other words, the finan 
cial autonomy of the Court really means that its expenses are born 
by the several States which adopt its budget as proposed by itself, 
but that the machinery set up by the League for collecting fund 
and for auditing and the like are, in the interests of simplificatio 
and economy, put to profit also as regards the Court. It has been 
asked why, if this is so, the several States could not pay their con 
tributions direct to the Court without passing through the inter 
mediary of the League, and whether the reason is not that suc 
system would be prejudicial to the usefulness of the Court. Th 
reply would seem to be that theoretically it would certainly be po 
sible for the Court to stand entirely on its own financial legs an 
that it is difficult to see how such a situation could impair the Court’ 
usefulness. But, on the other hand, I must confess that I cannot 
see the practical utility of a reform to that effect. It would mean 
the necessity of creating at The Hague a small edition of the ma- 
chinery already existing at Geneva, thus increasing the cost of up 
keep of the Court and giving additional trouble. 

There is one more point involved in this question, a point of 
principle. As I just mentioned, the Statute lays down that the 
expenses of the Court are to be borne by all the Members of the 
League and not only by the States having signed and ratified the 
Court’s Statute. This is entirely reasonable, because as I explained 
at the outset, the Court is open upon absolutely the same footing 
and upon the same conditions to Members of the League and to 
States mentioned in the Annex to the Covenant whether they have 
or have not signed the Statute. —This, by-the-by, constitutes to 
my mind the reason why, once the Statute had come into force, 
signatures and ratifications were no longer forthcoming. As a mat 
ter of fact, under the Protocol of signature to which the Statute is” 
attached, ratification by a majority of the Members of the Leagu e 
was required for the coming into force of the Statute, but once this 
event had happened, ratification was no longer of real importance, 
since it conferred on the ratifying State hardly any right or du , 
which it did not already possess by virtue of its membership of the 
League and—in the case of States which are not members but which 
are mentioned in the Annex to the Covenant,—the ratification of the 
Statute would perhaps create new moral obligations but could give 


[60 ] 


381 


rise to no rights which do not already exist. But—to return to our 
starting point,—would it not be difficult for the Court or for the 
Registrar to collect contributions from Members of the League, 
notwithstanding their undoubted rights to make use of the Court, 
if they had not ratified the Statute? The same difficulty cannot, of 
course, exist at Geneva. 

In this connection, I may state that the financial relations between 
The Hague and Geneva are really the only administrative relations 
which exist between the Court and the League of Nations. For 
certain reasons, I want specifically to emphasize that the Geneva 
Secretariat has no say whatever in the appointment of the officials 
of the Registry. Once appointed by the Court, on the proposal of 
the Registrar, these officials become beneficiaries to certain rights 
belonging to officials of the League, especially as concerns the pay- 
ment of pensions and sickness insurance, but the Secretariat assumes 
no right of control over them. For instance, the administrative 
tribunal now about to be set up by the League will have no jurisdic- 

ion over the officials of the Registry who are justiciable exclusively 

y the Court itself. 

Another department of the Registry, of comparative recent crea- 
ion, is the printing service. This service was made necessary by 
e extension which the Court’s publications gradually assumed. 
he Court’s printing is done by one single plant, situated at Leiden, 
ith which the Registrar has concluded a long time contract. The 
ain idea of this arrangement is that the Court buys at about cost 
brice the number of copies of each publication which it needs for free 
istribution, especially to States; but that for the rest, the number of 
pies to be printed off is fixed by the printer-editor according to his 
wn interests, which are, of course, to sell as many copies as possible, 
lis profit on the contract being derived only from the profit on the 

es. This by-the-by, is the best guarantee for the widest possible 
istribution of the Court’s publications. In order to bring down the 

t of production and also because of the fact that most of our 
a examples of possible differences between the status of members having ratified and 

bers not having ratified, the following may be mentioned: 

| (a) Itis possible that States not having ratified the Statute (i. e. the Protocol of Decem- 
16th, 1920) would not be entitled to sign the Optional Clause concerning the Court’s 
pulsory jurisdiction; 

(b) Itis S obable that the Court would have jurisdiction under Article 37 of the Statute 
aCe ae parties to the treaties referred to therein—States having ratified 

(c) States having ratified the Statute might be considered as having pledged themselves 


execute such measures of interim protection as may beindicated under Article 4r of the 
ute, such not being the case as concerns States not having ratified. 


[ér ] 


382 


printing is done in French and English but in a Dutch plant, an 
tensive control, both of the manuscripts sent off for printing and o 
the printing work itself, is essential, and it is this control that is al 
sumed by the printing branch of the Registry. 

I take this opportunity of giving you a few facts about the Court! 
publications. They are divided, as you know, into five series, A 
B, C, D and E. Series A and B are intended for the publication d 
the Court’s judgments and advisory opinions. 

Series C includes all the documents relating to such cases a 
opinions, namely, documents of the written proceedings, verbati 
reports of oral statements, all the evidence produced, and even t 
diplomatic correspondence concerning the cases in so far as that co 
respondence is likely to throw any light on the proceedings and upo} 
the case itself. I think I am safe in affirming that never before ha 
publicity on this scale been carried out by any international tribunal 
and I shall also be safe in saying that if that had been done, Judg 
John Bassett Moore would have been saved an immense amount ¢ 
work. It has been pointed out that at the outset the Court pub 
lished only documents which were not already printed by the partie 
or by the Governments concerned, but did not reproduce in its col 
lection the documents of a case in so far as they had already bee 
printed by the parties. The ensuing gaps have, however, been fille 
long ago by publishing a certain number of so-called “additiong 
volumes” to the various numbers of the Series C publications, whiel 
therefore now comprise all acts and documents relating to the case 
and questions, including the written proceedings which were not a 
the outset to be found in the Court’s collection. ‘ 

Series D has a double aim. It contains the Court’s Rules an 
the documents likely to explain the Court’s interpretation of thos 
Rules, namely, the records of the Preliminary Session of the Court 
when the Rules were first adopted, and of the Session which closet 
a few days ago, in the course of which the Court adopted the revise 
Rules which are now in force. In the second place, Series D con 
tains a collection of the various treaty provisions governing th 


mi 
Court’s activities. Such a collection is published periodically an 


[ 62 ] 


| 383 


{ 


Ririsdiction has recently taken. If I am not mistaken, something like 
160 treaties are listed in it, and the relevant clauses thereof are re- 
produced. Our policy indeed is not to reproduce the whole of the 
treaties including the clauses conferring jurisdiction on the Court, 
because this would make far too bulky volumes and would not 
swer the reference purposes for which these volumes are pre- 
ared. But, in order that the complete text may, if desired, be 
zasily found in each case, every clause is accompanied by a state- 
ent of the official source or sources where the whole of the authen- 
tic text of the treaty is available. The volume now being prepared 
will, moreover, contain, as a kind of introduction, a systematic 
study of all the various clauses. This is desirable because of the 
ide divergence of these clauses, which range from the declarations 
of the acceptance of the Court’s compulsory jurisdiction for all 
egal questions, to mandate clauses, for instance, and clauses in 
nilateral minority declarations made by certain so-called new 
States before the Council of the League of Nations 
As concerns Series E, one fact is of particular importance. As you 
ill remember, it is called the ‘Annual Report of the Court.”’ 
t 7s an annual report, but not a report addressed to anybody in 
articular but to the public in general. At the 1924 Assembly, 
erious objections were raised because the Council of the League 
n its annual report to the Assembly had said nothing about the 
ourt. In answer, it was rightly observed that because of the 
ourt’s independence, the Council had no business to report upon 
ts activities. The result, therefore, was an invitation to the Court 
r0 Cause a report of its own to be prepared. The Court agreed, but 
n its decision to that effect it expressly stated that its report was to 
orm a special series of its publications and was not to be a report 
‘o the Assembly. The detailed facts in this respect are set forth in 
e introduction to the first volume of the report. The second vol- 
ime will appear in a few days. It is a continuation of the first, on 
hich it is entirely based and the policy of which it has adopted. 
jn this respect, I would like to explain just one thing. The question 
das sometimes been raised why it is that only the Court’s decisions 
nd not the dissenting opinions, if any, are summarized in the re- 
i The answer is, firstly, that the dissenting opinions are pub- 
shed in extenso in connection with the full text of the judgments 
d advisory opinions; and secondly, that the annual report is only 


[63 ] 


384 


intended to give a survey of the Court's activity as such. Thi 
activity consists, amongst other things, of pronouncing judgmen 
and opinions, the dissenting votes of minority judges not formi 
part of these. Finally, it would be an extremely delicate matter fo 
the Registry to summarize individual opinions, such summaries b 
ing likely to give rise to objections on the part of the authors of t 
dissenting votes. | 

The department of the Registry to which I want to refer in co 
clusion is the shorthand and typing branch and the multi-copyi 
service. What I said at the outset about the elasticity of the orga 
zation is especially true about this department. It is likewise in thi 
domain that we have been able little by little to constitute a sm 
‘body of what I may be allowed to refer to as ‘‘permanently te 
porary”’ officials: I mean to say, officials whom we can call upo 
to work for us whenever necessary, and who, therefore, in a certail 
sense, form part of our permanent staff. This department, wher 
work is carried out in French and in English, knowledge of 
man and Dutch being however also desirable, includes verbatim re 
porters capable during an emergency, of reporting hearings. Nor 
mally our verbatim reports are drawn from the Senate in Paris a 
from the Law Courts in London. Personal secretaries are attache 
only to the President and to the Registrar, the shorthand and typin 
branch supplying secretarial assistance to the judges. 

It may interest you to know that the really permanent staff of 
Registry consists of about a dozen people, and that during session 
the number is increased to about twice or thrice this number. 


* Ke * 


Before finishing this introductory statement, and before yieldin| 
the floor to those of you wishing to put questions to me, in orde 
to complete this exposé I wish to say a word about the relation 
between the Permanent Court of International Justice and th 
Permanent Court of Arbitration. I am so often asked what is thi 
fundamental difference between the two courts, rendering necessar] 
the existence of the Court of Arbitration besides the Court of Justice 
that I think a reply to this would be really desirable. In this respect 
I may be allowed to say first of all that the Statute of the Courtq 
Justice expressly lays down that that Court is there to supplement 


J 


the Court of Arbitration with which it is co-existent; but apart f or 


[ 64 J 


385 


lis somewhat formalistic point of view, I should like to point out 
iat the wider the range of international jurisdictions open to States, 
1e greater the chance for a more or less complete realization of the 
leal of the judicial settlement of international disputes. I think 
is recognized as a fact that, in matters where political elements are 
atively preponderant as compared with purely legal disputes, 
tates are more readily prepared to come before Courts whose mem- 
ers are entirely of their own choice than before a Court the com- 
dsition of which is fixed. It is true that Article 38 of the Statute 
' the Court of Justice provides in its last paragraph that the Court 
in also, should the parties request it to do so, give judgment not in 
w but in equity.2 To my mind, however, it is not likely that States 
ill avail themselves of this possibility. It is, I think much more 
robable that, should they desire a dispute, which has arisen between 
em, to be decided not on strict grounds of law but on grounds of 
portuneness, they will apoint a special arbitral tribunal, and 
is is where the old Court of Arbitration retains its usefulness, as 
proved, moreover, by certain modern treaties such as those drawn 
>) at Locarno. On the other hand, it does not seem to me to be 
pubtful that, generally speaking, the tendency is to have recourse 
| the Court of Justice rather than to the Court of Arbitration. 
latistics show that the Court of Justice has decided in the four 
‘ars of its existence the same number of cases, including opinions, 
; was settled through the instrumentality of the Court of Arbitra- 
| m in more than twenty-five years. Further, when renewing their 
sbitration treaties, many States, including the United States, have 
i etimes provided that the competence conferred by the treaties 
the Court of Arbitration shall be ipso facto transferred to the 
burt of Justice the moment both contracting parties are members 
, the League or adhere to the Statute of the Court. The reason 
fr this preference would seem to me to lie in the fact of the real 
Hemanence of the Court of Justice, which consists of a certain 
umber of persons who meet regularly, at least once a year, and who 


i 
if 


: It is a fact that the last paragraph of Article 38 of the Statute was introduced by the 
‘sembly of 1920 into the scheme prepared by the Advisory Committee of Jurists in order 
provide for the possibility of the homologation by the Court, in the form and with the 
Pct of a judgment, of an agreement reached in Court between the parties (‘‘jugement 
Hecord’’). The terms of the paragraph are, however, wider and seem to allow the Court 
bs ive judgment, should the parties so desire, not merely on grounds of law, but also on 
Bunds of Opportuneness. They may, however, also be looked upon as conferring on the 
¢ rt, with the consent of the parties, the owner to indicate—as is the case in certain mod- 
e) arbitrary treaties—what, failing a provision or principle of law applicable to a certain 
jit, in its opinion, the law should be on this point. 


[65] 


386 


are then prepared to take up any case submitted to them, wherea 
the Court of Arbitration consists only of a permanent bureau and 
list of persons designated by their respective Governments as bei 
especially suitable to serve as members of arbitral tribunals. 
other words, whereas the Court of Justice is always ready to fun 
tion, a special tribunal created within the framework of the Cour 
of Arbitration has to be set up by agreement between the partie 
and if no such agreement is reached, there is no tribunal. Furthel 
the permanence of the Court of Justice leads to the creation of a reg 
jurisprudence, for even if it is not bound by the precedents set t 
by itself, it is very likely that it will decide similar cases on similé 
grounds and ina similar way. The Statute expressly excludes, it 
true, previous decisions of the Court as compulsory precedents ft 
the Court’s subsequent decisions, but it is certainly compatible 
the spirit of the Statute that the Court should not reverse an earlie 
decision save for cogent reasons, and it goes without saying tha 
judgments rendered by one and the same body are far more likel 
to follow a uniform line of thought than those that are given f 
tribunals of varying composition. The fact that behind a give 
judgment of the Court there is a jurisprudence, would seem to f 
to add immensely to the effect of the judgments and therefore to # 
usefulness of the Court as an instrument of international pacifica 
and cooperation. 
It results sufficiently from what I have already said that to m 
mind the question whether the Court of Arbitration should not dis 
appear is entirely futile. But for the sake of completeness, I wi 
place myself for a moment on the basis of the hypothesis that 


same fate would not necessarily be reserved for the Court of Justid 
because of the disappearance of the electoral groups provided for! 
the Statute.1? Of course, any answer to this question must be merel 
conjectural. But there is in the Statute a provision which gives 
precious guidance, namely, the provision according to which a Sta 
Member of the League is entitled to nominate candidates to pos 
as Members of the Court of Justice even if it does not belong to t 

10The present system of electing the judges was first sketched out in a statement ma 
by Mr. Root at the meeting held by the Advisory Committee of Juristson June 18, 


He therein indicates, as the source of his inspiration, certain events in the constitutiot 
development of the United States of America. 


[ 66 ] 


387 


at of Arbitration. In this case, such State is to appoint an elec- 
yral group constituted in the same way as if they were a group 
members of the Court of Arbitration. This system for the nomi- 
ation of candidates to the posts as judges could certainly be gen- 
alized should the Court of Arbitration disappear; but I want em- 
aatically to repeat that such an event ought not to be envisaged. 


+ * # 


I have now reached the end of my statement, and in placing my- 
If, according to the suggestion which I ventured to make at the 
tset, at your disposal for answering such questions as you might 
e to put, I beg to thank you for the attention which you have so 
ndly granted me. 


[67] 


388 


REFERENCES 


Publications of the Permanent Court of International Justi 

Series A, Collections of Judgments. 

Series B, Collection of Advisory Opinions. 

Series C, Acts and Documents Relating to Judgments and 
visory Opinions Given by the Court. 

Series D, Acts and Documents Relating to the Organization 
the Court. 

Series E, Annual Reports. 

Advisory Commission of Jurists, Documents, 3 vols. 

Conference of States Signatories of the Protocol of Signature of tl 
Statute of the Permanent Court of International Justice, Geney 
September I to 23, 1926, Minutes. 

(The American agency for these documents is the World Pea 
Foundation, 40 Mt. Vernon Street, Boston, Massachusetts 


Pamphlets issued by: 
The World Peace Foundation, 40 Mt. Vernon Street, Boston, Ma 
Foreign Policy Association, 18 East 41st Street, New York Cit 
League of Nations Non-Partisan Association, 6 East 39th Stre¢ 

New York City. 
National Council for Prevention of War, 532 Seventeenth Streg 
N. W., Washington, D. C. 
The American Foundation (maintaining the American Pez 
Award), 565 Fifth Avenue, New York City. 
Chicago Council on Foreign Relations, 140 S. Dearborn Streg 
Chicago, Illinois. 


manent Court of International Justice; II. List of States accep 
ing the Protocol; III]. Statements by President Harding, M 
Hughes, Mr. Root and Mr. Hoover with regard to the Adherenl 
of the United States to the Protocol; IV. The Organization 
the Permanent Court of International Justice, by Mr. Jol 
Bassett Moore. 

May, 1923. 

[ 68 ] 


389 


The Permanent Court of International Justice, by John Bassett 
Moore. The United States and the Court. Information Regard- 
ing the Court. 

_ April, 1924. 

03 America’s Part in Advancing the Administration of Interna- 
tional Justice, by Edwin B. Parker, Umpire, Mixed Claims 
Commission, United States and Germany. 

October, 1924. 

98 Plans and Protocols to End War, Historical Outline and Guide, 
by James T. Shotwell. 

March, 1925. 

14 The Advisory Opinions of the Permanent Court of International 
Justice, by Manley O. Hudson, Bemis Professor of International 
Law, Harvard Law School. 

November, 1925. 

9 The Fourth Year of the Permanent Court of International Jus- 
tice, by Manley O. Hudson, Bemis Professor of International 
Law, Harvard Law School. 

April, 1926, 


ooks: 

f Bustamante, Antonio Sanchez, The World Court, translated from 

the Spanish.by the American Foundation, The Macmillan Com- 

pany, New York, 1925; price $2.50. 

achiri, Alexander P., The Permanent Court of International Justice, 
Oxford University Press, 1925. 

ill, David Jayne, The Problem of a World Court, Longmans, Green 

and Co., New York, 1927. 

tudson, Manley O., The Permanent Court of International Justice 

and the Question of American Participation, Harvard University 

| Press, 1925; price $4.00. 

ellor, Frances: Hatvany, Antonia, The United States Senate and 

| the International Court, New York, 1925. 

‘oore, John Bassett, International Law and Some Current Illusions, 

| New York, 1924. 

tott, James Brown, The Project of a Permanent Court of International 
Justice and Resolutions of the Advisory Committee of Jurists; 

report and commentary, Carnegie Endowment for International 

| Peace, Washington, 1920. 


[69 ] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, 1907 to No. 199, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
application to International Conciliation, 405 West 117th Street, New York 

ity. 


216. Final Protocol of the Locarno Conference, r925, and Treaties between 
France and Poland and France and Czechoslovakia. 
January, 1926. 
217. Peasant Conditions in Russia, 1925, by Jean Efremoff, Former Minister 
of Justice in the Provisional Government of Russia. 
February, 1926. 
218. The Institute of Pacific Relations, by J. Merle Davis, General Secretary. 
March, 1926. 
219. The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 
April, 1926. 
220. Disarmament and American Foreign Policy. Articles by James T. 
eet Rhee Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- — 
erlain. 
May, 1926. 
221. Treaty-Making Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 
June, 1926. 
222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 
Rappard, H. Wilson Harris and Raymond Leslie Buell. 
September, 1926. 
223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 
in the Government of Italy. Recent Legislation in Italy. 
October, 1926. 
224. An Alternative Use of Force: When the Earth Trembled, by Richard ~ 
J. Walsh; The Moral Equivalent of War, by William James. 
November, 1926. 
225. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 
Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 1926. 
226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. — 
Moon, and Edward Mead Earle. 
January, 1927. f . 
227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 
Recent Chinese Politics and Diplomacy. 
February, 1927. , 
228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bruce, 
Prime Minister of Australia. 
March, 1927. . 
229. Locarno and the Balkans: A Turning Point in History, by James T. 
Shotwell; The Possibility of a Balkan Locarno, by David Mitrany. 
April, 1927. 
230. The Interallied Debts. Statements as to the Desirability of an Early 
Revision of Existing Arrangements. 
May, 1927. R . 
231. The League of Nations: The League of Nations as an Historical Fact 
by William E. Rappard; The Admission of Germany to the League of 
Nations and Its Probable Significance, by Caleb Perry Patterson. 


Hammarskjold. 
September, 1927. 


INTERNATIONAL CoNCILIATION 


Published monthly, except July and August, by the 
Carnegie Endowment for International Peace 
Entered as second-class matter September 15, 1924, at the post office at 
“Worcester, Massachusetts, under the Act of March 3, 1879. 


THE GENESIS OF THE UNIVERSAL 
POSTAL UNION 
A Study in the Beginnings of 
| International Organization 
| By 
| Joun F. SLy 
| Lecturer on Government, Harvard University 


OCTOBER, 1927 
No. 233 


f CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 

i DIVISION OF INTERCOURSE AND EDUCATION 

i PUBLICATION OFFICE: 44 PORTLAND STREET, WORCESTER, MASS. 
i EDITORIAL OFFICE: 405 WEST II7TH STREET, NEW YORK CITY 


Subscription price: 25 cents for one year, one dollar for five years 
Single copies 5 cents 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


Trustees 
RoBERT S. BROOKINGS Frank O. LowDEN 
NicHoLAS Murray ButTLEeR ANDREW J. MONTAGUE 
Joun W. Davis Dwicat W. Morrow 
FREDERIC A. DELANO RoBERT E. OLps 
Lawton B. Evans Epwin B. PARKER 
AUSTEN G. Fox LERoy PERCY 
RoBert A. FRANKS Wiiam A. PETERS 
CHARLES S. HAMLIN Henry S. PRITCHETT 
Howarp HEINZ Ex.imu Root 
Davip JAYNE HILt James Brown Scott 
ALFRED HoLMAN James R. SHEFFIELD 
WILLiAM M. Howarp Maurice S. SHERMAN 
ROBERT LANSING James T. SHOTWELL 


Smas H. StRAWN 


Officers 


President, NicHoLAS MurRAY BUTLER 
Vice-President, ROBERT LANSING 
Secretary, JAMES BROwN ScoTT 

Assistant Secretary, GEORGE A. FINCH 
Treasurer, ANDREW J. MONTAGUE 
Assistant Treasurer, FREDERIC A. DELANO 


Executive Committee 


NicHoLas Murray Butler, Chairman 
James Brown Scort, Secretary 
AusTEN G. Fox Henry S. PRITCHETT 
ANDREW J. MonTAGUE Exrrau Root 
James T. SHOTWELL 
Division of Intercourse and Education 


Director, NICHOLAS MurRAY BUTLER 


Division of International Law 


Director, JAMES BRowN SCOTT 


Division of Economics and History 
Director, JAMES T. SHOTWELL 


| CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
Director, NicHoLASs Murray BUTLER 


Assistant to the Director, HENRY S. HASKELL 

Division Assistant, AMy HEMINWAY JONES 

Office, 405 West 117th Street, New York City 
Telephone, Cathedral, 4560—Cable, Interpax, New York 


SPECIAL CORRESPONDENTS 


Sir WILLIAM J. Cotiins, M.P., London, England 

JEAN EFREMOFF, Paris, France. (Russia) 

F. W. ForErsSTER, Zurich, Switzerland. (Germany) 
HELLMUT VON GERLACH, Berlin, Germany 

EpDOARDO GIRETTI, Bricherasio, Piedmont, Italy 

CHRISTIAN L. LANGE, Geneva, Switzerland 

David MitrRaAny, London, England. (Southeastern Europe) 
TsuNEJIRO MrvyaokA, Tokyo, Japan 


Centre Européen 
Comité d’Administration 


1) 


Pau AppPeLL, France, Président Henry LICHTENBERGER, France 


Moritz J. Bonn, Germany GILBERT Murray, Great Britain 
: UILLAUME Fatio, Switzerland ALFRED NERINCX, Belgium 
\LFRED G. GARDINER, Great Nicotas S. Poritis, Greece 

| Britain E. von PRITTWITZ UND GAFFRON, 
foe Honnorat, France Germany 

3EORGES LECHARTIER, France JosEerH REDLIcH, Austria 


Count CARLO Srorza, Italy 


Directeur-Adjoint, EARLE B. BABCOCK 

lh Générale, MLLE. M. TH. PEYLADE 

Auditeur, Ta. RUYSSEN 

Bureau, 173 Boulevard St.-Germain, Paris, France 

\ Téléphone, Fleurus 53.77—Adresse Télégraphique, Interpax, Paris 


CONTENTS 


UMMARY OF THE WORK OF THE UNIVERSAL PosTAL UNION 
SINCE 1874 
CONGRESSES AND CONFERENCES 


INTERNATIONAL BUREAU 


| Page 
ER AGTS G0) SNE te le 7 
THE GENESIS OF THE UNIVERSAL PostaL UNION. 9 
I) RULES FOR THE CONFERENCES ........... 18 
ORIGINAL PROJECT 20 
NOTES AND REFERENCES 37 


51 
57 


393 


PREFACE 


The Universal Postal Union, working with the greatest economy 
Mf time and effort, comprises today nearly all of the countries of 
he world, its territory extending over more than 126 million square 
cilometers with a population of 1,792 millioninhabitants. An article, 
xy Mr. John F. Sly, giving a scholarly description and interpreta- 
ion of the origin of this Union will be found in this issue of Inter- 
lational Conciliation, together with a résumé of the development 
ff the Universal Postal Union since 1874, compiled from a report 
nade on August 31, 1926, by M. Garbini, Director of the Inter- 
lational Bureau of the Universal Postal Union, before a group of 
\merican professors visiting Geneva as guests of the Carnegie En- 
owment. Those interested in studying the subject still farther may 
btain helpful material from the International Bureau, Universal 
ostal Union, Berne, Switzerland. 

NicHoLas Murray BUTLER 


Yew York, September 1, 1927. 


[7] \ 


395 


THE GENESIS OF THE UNIVERSAL POSTAL UNION 


A Study in the Beginnings of International Organization 


By Joun F. Sty 


Lecturer on Government, Harvard University 


“The Postal Union, having by its birth effected a revolution 
in the constitution of the society of nations, has had a forty years’ 
history of placid obscurity, unworthy of the notice of patriots, 

-and rarely recognized as a herald of the Millennium by an 
: occasional pacifist.”—L. S. Woolf, International Government, 


| 197. 


_A letter from New York City to the Republic of Latvia is hardly 
“matter for comment. The five cent domestic stamp affixed by the 
ender may be impressive as a very moderate sum for so long a jour- 
ey, but it arouses little speculation. The route, moreover, that the 
stter is to take, the frequency of its dispatch from the port of em- 
arkation, the approximate time occupied in transit across inter- 
iediate countries, are not subjects of which it is usual to inquire. 
either will financial phases of the transaction be likely to arouse 
iterest. The final disposition of the five cents, the cost of the mari- 
me conveyance, the determination and collection of the transit 
; arges, have become matters of no general concern. While behind 
lese arise questions that are even less frequently suspected—the 
icate adjustments of postal opinion in a dozen congresses and 


mplete machinery for advisory opinions, arbitrations and amend- 

ents, and a mass of international administrative regulations de- 

med to keep the restless pulse of world communication within 

ft and accustomed channels. 

But inquiry would show that information concerning such matters 

accessible and precise. The route that a letter might take from the 
ted States to Latvia could be followed almost daily: 


New York to England or France, about three times a week. 
Time,6 to § days. English Channel port, via London, to Folk- 
stone, thence, via sea route, Folkstone-Vlissingen, to the 


[9] 


396 


Netherlands, thence by rail to and through Germany, Poland, 
Danzig, and Lithuania to Latvian frontier. Time, 54 hours. 


(or) 

French Atlantic port, via Paris, to and through Belgium, 

Germany, Danzig, Poland, and Lithuania to Latvia. Time, 
50 to 55 hours. 

(or) | 


Occasionally dispatched via direct sea route to Sweden. 
Time, 10 to 1m days. From Gothenburg to Stockholm (R. R.). 
Time, 12 hours. From Stockholm to Libau. Time, 2 days. — 


Additional queries would be answered in a few short clauses 
the most recent Universal Postal Convention: 


The countries between which the present Convention is con- 
cluded form, under the title of the Universal Postal Union, 
a single postal tenitary for the reciprocal exchange of o— 
spondence. 

Except in the cases expressly provided for by the Conven- 
tion, each Administration keeps the whole of the sums whicl 
it collects.? 

Freedom of transit is guaranteed throughout the entire 
territory of the Union. 

The cost of transit . . . is borne by the Administration 
of the country of origin. . . 5 | 


In addition, the essential organs and procedure that make 
flexible and effective application of such principles possible wou 
be found outlined in the same document. There is full provision 
the constitution and extent of the union;® the arbitral procedure 
be followed in case of dispute between members as to the inter 
tation of the convention and agreements;’ provisions governing 
gresses, conferences, and committees of the union;§ and articles pi 
viding for a central office of “liaison, information, and consultationJ 
But should more intimate examination be desired there must | 
opened the acts and documents of postal congresses and conferen¢ 
the annual reports and statistical summaries of an active in 
national bureau, significant special and periodic publications, 
numerous secondary accounts describing the activities of a univer 
parliament that without public criticism of even serious comm 
has for more than half a century given postal law to the civili 
world.1° 

The Universal Postal Union has but recently announced its fiftij 


[10] 


397 


anniversary." In the life of institutions it is still in infancy, but in 
measured accomplishment it has passed an exceedingly precocious 
youth. A little more than half a century ago emphasis was being 
iven to international postal conditions that make the modern situa- 
tion with all of its complexity appear a pallid reminder. Under 
the date of August 4, 1862, Montgomery Blair, the Postmaster- 
‘General of the United States, directed a letter to all countries with 
which his government maintained diplomatic intercourse: 


“Many embarrassments to foreign correspondence,” he 
wrote, ‘‘exist in this, and probably in other postal depart- 
ments, which can be remedied only by international concert of 
action. The difference in postal principles, as well as postal 
details of arrangement, in the several countries of both conti- 
nents contributes to the result. Great diversity of rates pre- 
vails between the same points, in some instances as many as 
six different rates, according to the route of transit. Mistakes 
are perpetually recurring, arising from the complexity of 
present arrangements, and operate to the serious delay and 
expense of correspondents. . . . Without entering into details, 
it is evident that the international adjustment of a common 
basis for direct correspondence, and for intermediate land and 
Ocean transit, and for an international registry system, and 
for the exchange of printed mail matter, is clearly of the first 
importance to the commercial and social intercourse between 
this and other nations.’ 


At the time eight separate postal conventions were in operation 
etween the United States and as many foreign governments. Under 
eir provisions all postal operations of an international character 
ere given effect. The prescribed rates were usually of four parts. 
There was the domestic rate established by the United States. To 
is was added the “‘sea postage” for maritime transport, and the 
msit rate assessed by each country through which the article 
ssed to its destination. Finally, there was to be added the do- 
estic rate collected by the country in which the article was de- 
ivered. The ‘“‘sea postage’’ and transit charges were levied with 
wildering variations depending usually upon the route traversed 
Or upon the nationality of the vessels making the conveyance. In 
ding an article to Austria, for instance, it was important to know 
hether it was to go by steamer sailing for Bremen or Hamburg 
irect, or via England, or via France, for the rate would be fifteen, 
irty, or forty-two cents per half ounce according to the choice 


Cir] 


398 


of routes. To communicate by post with Australia was a question ¢ 
six different routes requiring postage, respectively, of five, thirty 
three, forty-five, fifty-five, sixty cents or a dollar and two cents pe 
half ounce. For Greece, Turkey, Egypt or Hongkong, five route 
with varying rates were possible. There were four routes offered fo 
Germany and Switzerland; three for Denmark, Holland, Swede 
and Norway; and two (based on the distance covered in transit 
for Canada and Mexico." 

During the decade extending from 1863, a similar condition pre 
vailed throughout the civilized world. In postal communication 
with four European countries, Russia maintained in the aggregat 
thirteen possible routes, ten of which carried different rates. The 
were four routes from Norway to the United States with’two separat 
rates. Austria had two lines of communication to Portugal,—vis 
Germany and via Italy—the latter route cost twice as much as th 
formerand thecheaper was thirty-seven centimes for fifteen grammes.# 
Under the tariff issued by the Prussian Postal Administration 
1867 (the last before giving up its independent existence and be 
coming part of the postal administration of the North German Con 
federation) the postal charges on letters appeared as follows: t 
Belgium, thirty pfennig; to France, forty-five pfennig; to Grea 
Britain, via Belgium, fifty pfennig; via France, fifty-five pfennig 
to Italy, via Switzerland, sixty-eight pfennig; via France, sixty-five 
pfennig; via Austria, as a general rule, fifty-three pfennig. The 
correspondence with the Papal States offered four routes: via Swit 
zerland (by land), sixty-eight pfennig; via Switzerland to Geneve 
and thence by sea in French steamers, ninety pfennig; via Austria| 
forty-eight pfennig; and via France, eighty-five pfennig. A lettel 
sent by one of the first three routes could be prepaid only as far a 
the frontier of the Papal States. Those sent via France (becaust 
of a special postal treaty with the Papal States), could be prepai 
all of the way,—an unusual convenience and therefore of a highel 
rate. A registered letter from Berlin to Rome via ‘France was charged 
under the following tariffs: 


a) Prussian Postage, 2 x 30 pf. 60 pf | 

b) Foreign postage, three rates at seven and a half a 
grammes, 3 x 55 Im. 65 pf. 

c) Prussian registration fee 20 pf. 

Foreign registration fee, or second postage Im. 65 pf. | 
Total 4m. 10 pf. 


[12] 


399 


The highest rates were those between Prussia and the United 
States. The cheapest route was via Bremen or Hamburg,—sixty- 
ive pfennig—but there was only one steamer a week. A quicker 
way was by the “Prussian closed mail”’ by which Prussia made use 
of numerous steamship lines between England and the United States 
jut the postage was one hundred and twenty pfennig,—a sum then 
is now almost prohibitive for any but urgent correspondence.1 
_ But the difficulties of rates and routes formed only a part of the 
Beitucion. The treaties through which this complex communication 
vas controlled were marked by little uniformity of any kind. The 
nits of weight upon which the postal rates were based varied as 
xtensively as other requirements. Germany and Austria used the 
olloth; Great Britain and the United States, the ounce; France, 
lsum and Italy, the gramme. The scale of progression, more- 
ver, under which the rate advanced in accordance with the weight 
f the letter was equally diverse. In Germany and Austria the pro- 
ression was from Joth to loth; in England and the United States, by 
t half ounce; in France, by ten grammes; in Belgium and Italy, 
artly by ten grammes and partly by fifteen grammes; in Spain, by 
ven and a half grammes; and in Denmark, partly by three-fourths 
d partly by one-half loth. Some countries fixed the maximum 
eight of the letter at two hundred and fifty grammes. Others 
2cognized no limits. In some the thickness of the letters was re- 
icted. In Denmark, for instance, it was not to exceed two and 
ve-eighths centimeters. Great Britain fixed the maximum dimen- 
ions for foreign letters at two feet in length and one foot in width 
thickness. The sea-postage was equally confused. The exchange 
correspondence between the United States and the states of Eu- 
ppe was carried in English, French, American, or Hanseatic packet- 
joats or sailing vessels. The rate differed according to the route, 
nd because of this (as well as because of high postage) correspondence 
ith the states of inner Europe was especially difficult. Letters 
om Prussia to Central America, Mexico, and the West Indies by 
ay of the United States, cost at least one hundred and forty-five 
ennig; to the west coast of South America, as much as two hundred 
d forty-eight pfennig; and even the postage on letters from Eng- 
d to Ecuador, Bolivia, Peru, Chile, and Guatemala was about 
0 shillings.16 
Aside from the enormous inconvenience and uncertainty in such 


[13] 


400 


a variety of usages, there were added administrative difficulti 
that were almost insurmountable. The complicated accounts nece 
sary between countries maintaining postal relations, each of whic 
in many cases, had to be credited with its portion of the sum prepai 
on each article (not on the aggregate weights of the mails) demande 
detailed records of bewildering complexity, while the actual co 
lection and transmission of foreign balances was difficult and & 
pensive.1? In some instances the dispatching office simplified matte 
by keeping the total receipts received. But it was generally deeme 
necessary (particularly in regulations between the larger countries 
to make special provision for distribution. Germany and Gre 
Britain, for instance, divided the receipts equally. Germany ar 
Italy, however, each retained the fees collected. Charges on letter 
from Germany to Switzerland were divided between the two co 
tries on the basis of three-fifths to Germany and two-fifths to S 
zerland. France and Great Britain divided their receipts on the bas 
of five-eighths and three-eighths, respectively. France required, ho 
ever, three-fourths of the postage on letters to Brazil, but, on th 
other hand, undertook to pay the charges of transport in full. 
in postal communication with Portugal, France received about ty 
thirds and Portugal about one-third of the receipts, and the cost 
transit was generally charged to the expediting office. The Unit 
States had agreed with several of the countries of North and Sout 
America to allow the dispatching office to retain all of the fees ¢ 
lected. With Italy, Norway, and Sweden, however, the receipt 
were equally divided after the transit charges had been deducte 
but with a similar transit agreement with Switzerland, the Unite 
States received three-fifths and Switzerland two-fifths of the tot 
net receipts, while with Great Britain both offices charged ten cen# 
an ounce for all prepaid letters expedited and a similar sum for a 
letters received that were not prepaid.18 

While the various postal administrations did not, apparen Hy 
anticipate much positive aid through international action, they agre 
to accept the suggestion of Postmaster-General Blair as made in I 
note of August 4, 1862, to attend a conference to be held in Par 
at which their common postal problems might be discussed. TE 
meeting opened, accordingly, May 11, 1863, and fifteen States { 
whom the communication of the United States had been addressq 
sent delegates.2° The deliberations of the conference were confing 


[14] 


401 


‘to questions submitted by the United States, Great Britain, and 
France which dealt in detail with the fundamental difficulties em- 
braced in the proposed uniformity of rates and the simplification of 
-accounts,—the latter carrying with it the complexities of the entire 
transit system. It was not the intention of the delegates to enter 
'any agreement of an obligatory character. The address of Mr. 
Vandal, Director-General of the French Posts and President of 
the conference, carried assurance that little of a definite character 
was contemplated. He made it plain that the delegates were with- 
‘out powers to settle or even to discuss certain practical facts which 
pertained only to the domain of diplomacy, and at the most were 
merely to place themselves in agreement relative to certain general 
‘principles that might, perhaps, later be made more definite in the 
interest of the public and, it was added, of the revenue of the res- 
pective governments.” He further assured the conference that ary 
decision which it might reach would have no obligatory effect upon 
anyone, and that it was understood that each government reserved 
to itself the most complete independence of action. But in spite of 
such inhibitions the deliberations that were completed on June 8 
led to the adoption of thirty-one articles,—‘‘principes ; 
comme étant de nature a faciliter les relations de peuple 4 peuple, 
‘par la voie de la poste, et pouvant servir de base aux conventions 
‘internationales destinées a régler ces relations,’’’’—that served a 
|valuable purpose in emphasizing the need of reform in the interest 
|of a more effective service, in giving publicity to the glaring defects 
Jof the existing system, and in delimiting the field through which 
)beneficial alterations were ultimately to come.” 

During the decade following the Paris conference, international 
postal relations continued to increase. The countries of Europe 
‘exchanged dispatches with each other and with the United States, 
land through the intermediary of the larger countries, with practi- 
cally all nations of the civilized world. Favorable influences from 
the discussions of 1863 were particularly evidenced in the new con- 
ventions concluded subsequent to that meeting, and the United 
States even undertook a thorough revision of its postal arrangements 
fe the direction of the principles embodied in the thirty-one articles. 
But such changes dealt mainly with the reduction of rates and there 
still remained the onerous lack of uniformity as well as the difficulties 
jJattending long and complicated accounts between the various ad- 


[15] 


402 


ministrations. It was probably the success of the Austro-Ger 
Postal Union formed in 1850 and composed of sixteen independen 
postal administrations that stimulated the interest of Germany ij 
a wider movement.25 The idea appears to have encountered mue 
opposition. Even specialists in postal matters were disposed 
dismiss the entire matter as hopeless and refused even to regard 
as possible of a utopian fulfillment.2* But in November, 1868, 
note composed by Mr. Stephan, Superior Privy Councillor of Post 
of Germany, presented a project for a postal union to embrace a 
civilized nations, and proposed at the same time to submit the pla 
to the deliberations of a universal congress.27 Indeed, diplomat 
preliminaries were commenced the following year, and the agent 
of the North German Confederation in Paris were directed to as 
certain the attitude of the French government towards such a pro 
ject. The investigation seemed to bring assurance of the cooperatioi 
of the Emperor Napoleon and of the General Postal Director, Van 
dal, but the finance minister objected that the probable loss in re 
enue would be such that France ought not undertake the projec! 
A delegate was, however, sent from the finance ministry to Berlin 
to converse upon the matter, but nothing came, directly, of 
meeting. 

Due to the Franco-Prussian War, the plan proposed by M1 
Stephan was temporarily abandoned, to be immediately revived 
however, upon the conclusion of peace. Upon the invitation 6 
Germany, supported by Belgium and the Netherlands, the govern; 
ment of the Swiss Confederation was requested to accept the re 
sponsibility of inviting the governments of the European countries| 
the United States, and Egypt to send representatives to a congress 
to meet in Berne, September 1, 1873. Russia, however, expressed 
an unwillingness to attend owing to the fact that the effect of seve al 
postal conventions recently concluded had not yet been sufficiently 
observed.?8 Because of this circumstance, the meeting was post 
poned until the following year, and it was not, therefore, until Sep 
tember 15, 1874, that the proposed Congress held its opening 


order. 
The meeting was held in the ancient building of the Swiss Diet m 
which until 1848 the representatives of the twenty-two Swiss camy 
tons were accustomed to assemble, and in which, it may be noted, iq 
[16] | 


: 403 
| the year 1849 the Swiss postal union was created.” Similarly there 
: were twenty-two states represented at the first postal congress. 
Pac opening session was composed of thirty-six delegates and ad- 
visors. In nearly every case they were postal officials of high dis- 
tinction. Twenty held positions analogous to the Director-General 
of Posts. Ten were under-secretaries, inspectors, or bureau chiefs. 
There was one consul, one secretary of legation, two conseillers, 
one finance minister, and a Swiss Landammann of the Canton of 
| Glaris.*° They attended with various powers. Thirteen of the dele- 
gations possessed full authority to negotiate, conclude, and sign a 
general postal convention within the limit of their instructions and 
subject to ratifications by their governments.*! Five submitted 
letters of credence authorizing them to represent their respective 
administrations but without conferring upon them the powers neces- 
sary to sign a convention. Three—Italy, Serbia, and Turkey— 
presented neither full powers nor letters of credence, but had had 
their nominations officially notified to the Swiss Federal Council 
through their respective governments. Because of such variations 
it was proposed to admit the delegates of all countries to take part 
in the deliberations of the Congress, and to express the wish that 
| those not supplied with the necessary powers to sign a convention 
subject to ratification, would take the proper steps to obtain such 
powers.*8 
Mr. Eugéne Borel, member of the Swiss Federal Council and Chief 
of the Department of Swiss Posts, welcomed the assembled delegates, 
and Mr. W. J. Page, delegate of Great Britain, responded on behalf 
of the assembly and concluded by nominating Mr. Borel as presiding 
officer of the Congress. The nomination received unanimous approv- 
al. Accepting the honor and thanking the delegates, the President 
designated two members of the Swiss postal administration to act 
as secretaries. The Congress then fixed eleven o'clock as the regular 
}hour of meeting, and in addition, approved a suggestion to provide 
a communiqué for the press, the smallness of the room making the 
presence of reporters inexpedient. The President then brought to 
the attention of the assembly the proposed rules of procedure for the 
‘guidance of the Congress presented by the Swiss delegation. They 
were short—a brief ten articles. But they seem to have summarized 
and provided for the embarrassments that were contemplated: 


bard 


404 
RULES FOR THE CONFERENCES 


Art. 1 


Each State or Administration may be represented by one 
or several delegates, or by the delegation of another State or 
Administration. 

It is understood, however, that the delegate or delegates of a 
State or Administration can be charged with the representation 
of two Administrations only, including the one that they 
represent. 

Art. 2 


The advisors of the delegates are admitted to the sessions, 
but without having the privilege of speaking or taking part in 
the vote. 

Art. 3 


The French language is adopted for the discussions and for 
the acts of the Conferences. 


Art. 4 


The project communicated to the States and Administra- 
tions shall be the basis for deliberation. 


Art. 5 


Every delegate may take part in the discussion of proposi- 
tions submitted to the Conference. f 

In voting, each contracting State and Administration has 
the right to one vote and one alone, whether several delegates 
represent the same State or same Administration or whether 
two States or Administrations have a single representation. 

The delegate who is incapacitated through illness from 
participating in the Conference shall have the privilege of en- 
trusting his vote to another State or Administration. 


Art. 6 


As a rule, there will be reported in the proceedings only the 
general progress of the meeting, indicating the propositions 
submitted with a summary of the supporting arguments and 
of the results of the deliberations. 

Nevertheless, each delegate has the privilege of claiming 
the insertion in the proceedings of any declaration made by 
him, summarized or in full, but in this case he is required to 
provide such declaration in writing on the evening following 
‘the meeting, 


[18 ] 


405 
Art. 7 


Every proposition placed in deliberation shall be submitted 
to a vote. 
__ The vote takes place by acclamation and follows the alpha- 
betical order of the States or Administrations represented. 


Art. 8 


The Congress is permitted to refer to special commissions 
: for examination, questions submitted to its deliberation. Each 
member of the Congress has the privilege of attending the 
_ meetings of the commissions without, however, taking part 
in the discussions. 
Art. 9 


) The result of the deliberations of the Congress shall be sum- 
_ marized in a proposed convention which shall be made the 
| object of a vote of the whole. 

' 

} 


Art. 10 


__ The adoption of the convention mentioned in the preceding 
articles is dependent upon the approbation of the contracting 
Governments, indicated through the ordinary channels.* 


The adoption of these rules im extenso occasioned no debate, and 
he Congress turned its attention to the nomination of a General 
ommission to examine such parts of the project as might be referred 
oit. Delegations from eleven States were chosen to form this body, 
Loa to participate as a body in the work of the commission, or to 
ct through a delegate of their choice.3* The members then listened 
; an apology from the Russian representative because of the re- 


uctance of his country to attend the proposed Congress of the year 
yefore, postponed the examination of credentials until the following 
(ay and adjourned the opening meeting of the first postal parlia- 
ent. 

| As the rules of the Congress prescribed, the basis of deliberation 
‘yas the project presented by the administration of the German 
osts, and previously communicated to the states and administra- 
3 invited to be represented at the Congress. The provisions 
ff this document dealing with the organization of the proposed 
nion were to a large extent contained in the following articles: 


[19 ] 


406 


ORIGINAL PROJECT 
presented 


By the Postal Administration of Germany 
and communicated to the States and Administrations 
invited to be represented at the Congress. 


General Postal Union 


Art. 1 


The States participating in the present convention shall 
be considered as forming a single territory in matters which © 
concern the reciprocal exchanges of correspondence between — 
their postal bureaux. They shall be designated under the | 
common name: ‘‘General Postal Union.” 


Art. 12 


The stipulations of the present convention do not involve 
any alteration in the interior legislation of any country nor — 
any restriction of the right of the contracting parties to con- 
clude treaties as well as to establish more restricted unions - 
with a view to a progressive improvement of postal relations. 

In consequence, through the present convention postal } 
confederations already existing among different territories shall 
in no wise be prejudiced, in matters regarding the stipulations 
concerning the reciprocal exchange of articles between the 
countries concerned. : 

Art. 13 


In case of disagreement between two or more members of — 
the Union as to the interpretation of the present convention, 
the question in dispute will be decided by arbitration; to that 


fp 
| 


majority of votes. 

In case of an equality of votes, the arbitrators shall choose ~ 
with a view to settling the difference, another Administration 
equally disinterested in the question in dispute. 


Art. 14 


Every three years at least, a Congress of plenipotentiaries of 
the countries participating in the treaty shall be held with 
a view to perfecting the system of the Union, of introducing — 
into it improvements found necessary and of discussing common 
affairs. ‘ y 


[20 ] 


| 407 


| Each state shall be represented by one vote. The countries 

which are not directly represented in the Congress shall have the 
privilege of transferring their votes to another member of 
_ the Union. 

They shall choose, at each Congress, the place where the 
following Congress is proposed to take place. 

No modification may be proposed to the present convention 
affecting the rates and the question of transit, unless by the 
unanimous consent of the countries of the Union represented 
at the Congress.*6 


It was the early discussion of these articles that brought into re- 
lief the view of the delegates relative to the problems of international 
organization that faced the Congress for solution. The first debate 
centered around the proposals for a uniform rate of postage and for 
gratuity of transit.37 It was long and animated. The entire prop- 
osition embodied in Article 9 (the article of the project most vitally 
concerned with this question), was therefore, referred to the General 
Commission for examination and report, and the remainder of the 
first two sessions given to preliminary expressions on each article 
‘of the proposed convention.’? The consideration of the first ten 
articles embraced very largely questions of a technical nature. The 
non-political character of the assembly was given emphasis in the 
discussion of Article 1 when on the motion of Mr. Stephan the words 
and the Adminisirations were inserted after the word Siafes, and the 
president emphasized that such change should be made where neces- 
i, throughout the convention. This practice was not, however, 
‘carried out in the final treaty, the word country (pays) being gener- 

ly used. But Article 11 was the first one considered to deal ex- 
clusively with matters of general international relations. Mr. 
Stephan, however, proposed to replace this article with another and 
the discussion was postponed until printed copies of the new ar- 
would be available for the use of each delegate.*? On 

€ motion of the President an amendment was then proposed to 
‘Article 12 of the project to insert the word postal between the words 
‘imterior and legislation, making the phrase when amended read in- 
tor postal legislation. This action led to a protracted discussion 
centering around the ability of the contracting countries to conclude 
co conventions or to form postal unions independent of the terms 
E the proposed convention. It was finally unanimously agreed 
i adopt, tentatively, a re-wording of Article 12, paragraph 1, as 
i 


lows: 


[21 ] 


. 
a 


408 


The stipulations of the present convention do not involve 
any alteration in the domestic postal legislation of any country, 
nor any restriction of the right of the contracting parties to 
maintain and to conclude treaties, as well as to maintain 
and establish more restricted Unions, with a view to a progres- 
sive improvement of postal relations.*® 


The second paragraph of Article 12 was then repealed by a vol 
of sixteen to three and the article as modified was adopted. 
attention of the Congress was then directed to Article 13. It ¥ 
stated that the method proposed to settle disputes between mer 
bers of the union was too complicated for those cases that mig 
be of minor importance, and there appeared in this discussion #1 
first mention of an international bureau similar to that then existi: 
in the International Telegraph Union. 

Mr. Vinchent, delegate of Belgium, announced his intention 
preparing a motion in this direction. Subject to future action, ther 
fore, the article was adopted. 

The discussion of Article 14 gave evidence of wide interest a 
diverging opinions. The first suggestion towards its perfection y 
a motion to insert a clause giving the proposed convention a defin 
duration. It was pointed out that no time limit was mention 
in the project. A state would, therefore, be unable to withdre 
from the union unless authorized by the unanimous consent of # 
members. This, it was stated, would make an inadmissible coi 
dition. A proposal was made to fix the duration of the conventioi 
at twelve years with tacit renewal. The Austrian delegate, Ba 
de Kolbensteiner, suggested a five year period. Mr. Fassiaux, del 
gate of Belgium, proposed a three year term for the conventioi 
with the privilege of renewal at three year intervals, or, as an alt 
native choice, a three year term with the privilege reserved to ead 
state that, at the expiration of that time, it might withdraw by 
giving a year’s notice in advance. The latter proposition was su 
mitted to a ballot and lacked but one vote of being accepted unai 
mously. In consequence it was agreed that the convention was 
last three years, with each state reserving the right to withdraw a 
the expiration of that period, subject to a year’s notice of such im 
tention inadvance. Finally, after anobservationmadeby Command 
Tantesio, delegate of Italy, relative to the representation in t 
Congress of states which did not send delegates, the assembly d@ 


[22 ] 


‘F 
409 


ided further to amend Article 14 by the addition of Article 1 of the 
ales of the Congress. With these changes, the article was adopted.” 
At the close of the third session (September 21) the president re- 
uested the General Commission to proceed as soon as possible to 
he coordination and rewording of the articles adopted by the as- 
sembly, but it was not until the fifth session of the Congress (Sep- 
ember 23) that the question of an international bureau was again 
onsidered, and with it the matter of the proposed arbitral procedure 
nder the convention.* The general discussion was opened on the 
jotion of Mr. Vinchent, delegate of Belgium. He emphasized the 
eed of an international bureau. He felt that such an organ was of 
he highest importance in regulating the affairs of the union. In his 
pinion, however, the proposed bureau should not be an authority 
ut simply an aid, and should be charged, perhaps, with settling 
sit accounts between the various administrations (both members 
d non-members of the union) and with publishing and distributing 
formation of a general interest to the public and to the administra- 
ons. The anticipated cost of such an office appeared to be very 
nall—merely a sum to cover expenses and to provide for the sending 
d receiving of certain documentary material. With these purposes 
view, Mr. Vinchent submitted two articles to the approval of the 
/... embodying the ideas developed through his remarks: 


take the proper steps to facilitate, in the common interest, 
the execution and application of the present convention. 

It shall organize under the name of the International Bureau 
of Postal Administrations, a central office, which shall function 
under its surveillance, and the expenses of which shall be 

borne by all the Administrations of the contracting States. 
| This bureau shall be charged with arranging, publishing 

and distributing information of every kind which concerns the 
|}international postal service, with issuing an opinion on ques- 
tions in dispute, drawing up proposals for the modification of 
the detailed regulations, of giving notice of alterations adopted, 
of facilitating the development of international accounts, 
| notably in the relations in Article 10 above [this article dealt with 
the relation of states outside of the union] and, in general, 
with considering and working out all questions in the interest 
of the Postal Union. 


| Art. 13 
A postal Administration, designated by the Congress, shall 


[23 ] 


410 


Art. 14 (formerly 13) 


In case of disagreement between two or more members of 
the Union as to the interpretation of the present convention, 
the question in dispute shall be submitted, in the first instance, 
to the judgment of the international bureau, established by the 
preceding article. 

If agreement is not reached in conformance with this opinion, 
the question shall be submitted to arbitral judgment and . 

[the remainder as in the original project].“ 


But the proposal met with prompt opposition. Baron Kolbe 
steiner, delegate of Austria, moved to repeal the first paragraph 6 
Article 13 as submitted by the Belgian delegate. He believed thi 
the conferring of authority upon a single member of the Union ¢ 
determine the character of such a service as the proposal contem 
plated might possibly lead to misunderstanding and even to offens 
and to avoid the possibility of such a contingency he proposed tl 
following amendment: 


There shall be organized, under the name of the Interna~ 
tional Bureau of the General Postal Union a central office, 
which shall function under the surveillance of a Postal Adminis- 
tration to be chosen by the Congress, and the expenses of which 
Se be borne by all of the Administrations of the contracting 

tates.*® 


Mr. Vinchent, however, continued to prefer his own proposa 
In further substantiation of his attitude he pointed out that in lookin 
forward to the day when the work of the convention would be a 
proved by the interested governments, a common center would Bi 
found necessary to which they might turn for needed informatiol 
and which, moreover, would function before the convention wen 


into effect. Baron de Velho, delegate of Russia, and Mr. Stephan 


vote of thirteen to seven.4* Baron Kolbensteiner then proposed # 
perfect the third paragraph of the same article by adding after th 
words with issuing an opinion on questions in dispute the words ¥ 


decide but simply to issue an opinion. It was thought that in casq 
of minor importance such a procedure would solve the difficulty 


[24] 


4il 


a satisfactory manner. But should the sole means of arbitration be 
that proposed in the project, it would, in many casés, entail delays 
that it would be best to avoid. The amendment was passed by a vote 
of fourteen to four, Serbia and Turkey not participating in the 
ballot. Article 14 as submitted by the Belgian delegate was then 
replaced by Article 13 of the project as first submitted by the Ger- 
man administration and was hereafter designated as Article 14 of 
the proposed convention. On the motion of Mr. Lahovari, delegate 
of Roumania, it was suggested that when an arbitral judgment be 
given, the decision rendered should be communicated to all the ad- 
ministrations of the union to serve as a guide to action in similar 
cases and to form a basis upon which to establish a postal juris- 
prudence. No opposition was offered to this motion, and Article 14 
was accepted.‘8 
As a consequence of adopting the motion providing for the creation 
of an international bureau, the Congress turned its attention to a 
ussion of the réglement d’exécution likewise proposed by the Bel- 
jan delegation. As presented to the fifth session of the Congress, 
t consisted of seven articles designated by the letters a to g inclu- 
ive. Article a provided for the choice of an administration to or- 
anize the international bureau provided in Article 13 of the proposed 
convention. Article 6 limited the expenses of the bureau to 50,000 
fancs a year, not including special expenses that might be incurred 
M preparation for the periodic congresses. It provided, also, that 
€ supervising administration make necessary advances in funds, 
d determine the annual account which should be communicated 
all of the other administrations. Both articles were adopted with- 
out debate. Article c embodied provisions for the apportionment of 
mses among the members of the union. To this end it was pro- 
posed to divide the contracting states into six classes. Each state 
placed in the first class was to pay twenty-five units of the total 
‘expenses; in the second class, twenty units; in the third, fifteen units; 
the fourth, ten units; in the fifth, five units; and in the sixth, three 
lunits. The number of units in each class was then to be multiplied 
/by the number of states in each class, and the sum of the products 
ould indicate the number of units by which the total expense should 
divided to obtain the quotient representing the amount of each 
it.° The proposal was referred to the commission on the régle- 
d’exécution, which was to receive communications from the 


[25] 


412 


states not classified, and from those which might care to formul 
objections to the classifications as assigned in the proposed article 
The discussion of Article d led to extended comment. As 

presented to the Congress it provided that the administrations 
the union should exchange reciprocally the notifications of all fa 
of interest in international postal relations, as well as publisher 
documents pertaining to their interior services. It was provide 
also, that as a general rule, the international bureau should serv 
as an intermediary for such notifications. Each administration was 
moreover, to furnish at the beginning of each year a complete serie 
of statistical information prepared in tableau form prescribed b 
the intermediary bureau. The bureau, in turn, was to coordinat 
this material into a general statistical statement, which it woul 
then distribute to all members of the union. To this proposal i 
was objected, however, that the administrations would not be abl 
to bind themselves to conform to whatever type of statistical infor 
mation the bureau might prescribe. It was likewise objected that th 
administrations might be unwilling as a general rule to notify th 
bureau concerning the divers facts of general interest. Such a st 
should be left to the discretion of each administration, for it seemé 
wise to avoid an intermediary from which it might be advantageous 
in certain cases, to be exempt.®! These objections were met by th 
Belgian delegate. He stated that if international postal statisti 
were to be used comparatively, a uniform model was necessary. Su 
a form should be determined by the international bureau. He ob 
served, further, that the expression general rule implied exceptions 
but that it was essential, nevertheless, that the bureau be kept 
formed of all the facts of general interest to the union. If such 


pected of it. In the face of this apparent disagreement, article 
was referred to the commission on the réglement d’exécution 
further examination. 

Article e provided that the international bureau should edit 
special journal in the French language. The various issues (as ¢ 
all other documents published by the bureau) were to be distribute 
to the administrations in proportion to the number of units con 
tributed by each to the expenses of the union. Supplementar 


i. 


copies were to be supplied at cost. Upon the motion of Mr. Stephan 
[26] | 


ee 


= 


So 


\ 413 


it was proposed to amend the article by adding after the word French 
the words German and English, making the article when amended 
read, a special journal in the French, German, and English languages. 
With this change the article was adopted. 
Article f was agreed to without comment. It read as follows: 
The International bureau should hold itself always at the 
service of the members of the Union for the purpose of furnish- 
ing them with any special information they may require upon 
questions relating to the international postal service. 
When there shall be submitted to the solution of the several 
administrations a question which requires the assent of all the 
members of the Union, those which shall not have sent in their 


reply within a period of four months shall be considered as giving 
their consent. 


The last article of the réglement considered at this session was 
Article g. It attempted to regulate the relation of the proposed 
bureau to future congresses. Under its provisions the bureau was 


_assigned the duty of preparing the work for the sessions of the postal 


congresses; of providing and distributing copies of proposed amend- 
ments, and of the procés-verbaux. The director of the bureau, more- 
over, was to assist the meetings of the congress, and take part in the 
discussions, without, however, the power of voting; and was charged 
in addition to make an annual report of the business of his bureau 


_ which should be communicated to all members of the union.*4 But 


to the contents of this article Mr. Stephan again objected. He felt 
that it would be preferable to place the preparatory work of the con- 


| gress in charge of the administration in whose country the meeting 


was to be held, rather than to place such responsibility on the in- 
ternational bureau. It would, moreover, be important that the 
administration of this country be completely familiar with the 
propositions to be discussed. Mr. Vinchent, sponsoring the original 
article, agreed that it would be most advantageous to assure the co- 
operation of the international bureau which would possess the docu- 
ments of a general interest. He felt, moreover, that it would be pos- 
sible to modify the wording of Article g to provide that, in order to 
assist in the preparatory work, the international bureau be placed 
at the disposition of the administration of the union in which the 
proposed congress was to meet. Here Mr. Lahovar, delegate of 
Roumania, proposed to add to Article g a clause to the effect that the 
official language of the bureau be French. This proposition was 


74 


414 ‘ 


adopted. As to the remainder, the wording of the article was re- 
ferred to the commission with instructions to consider the amend 
ments of Messrs. Stephan and Vinchent. 

With this part of the work temporarily completed, the Congress, 
after a short recess, returned to the consideration of additional 
articles of the project of the convention as proposed by the General 


Commission: 
Article 16 


Every three years at least, a Congress of plenipotentiaries 
of the countries participating in the treaty shall be held with 
a view ot perfecting the system of the Union, of introducing 
into it improvements found necessary, and of discussing com- 
mon affairs. 

Each State or Administration has one vote. 

Each State or Administration may be represented either 
by one or by several delegates, or by the delegation of another 
State or Administration. 

Nevertheless, it is understood that the delegate or delegates 
of a State or Administration may be charged with the representa- 
tion of two States or two Administrations only, including the 
one they represent. 

The next meeting shall take place in 1877 at . . . 

Nevertheless, this meeting may be held sooner if a request 
to that effect be made by one-third at least of the members of 
the Union. 

Article 17 

The present convention shall come into force on the first of 
July, 1875. 

It is concluded for three years from that date. When that 
term shall have passed it shall be considered as indefinitely 
prolonged, but each contracting party shall have the right to 
withdraw from the Union on giving notice one year in advance. 


Article 18 


All the stipulations of the special treaties, concluded between 
the various States and Administrations, in so faras they may be 
at variance with the terms of the present convention, are 
abrogated, from the day of taking effect of the present con- 
vention. : 

The present convention should be ratified as soon as possible 
and at the latest not later than three months previous to the 
date that it is to come into force.** 


None of these articles as reported caused the Congress difficulty. 
Mr. Manis, the Spanish delegate, proposed to amend Article 1 


[28 ] 


415 


by adding the phrase, The Congress shall fix each time, by a majority 
of votes, the place of meeting of the next Congress. But the motion 
received only one favorable vote as opposed to nineteen, and the ar- 
ticle as originally proposed, subject to arranging at a later time 
the place for the next Congress to be held, was adopted. Article 17 
| was accepted without comment, and with the exception of a minor 
objection to Article 18 that was adjusted by a short amendment, 
this article was likewise approved.** The Belgian delegation then 
announced through Mr. Vinchent that it would prepare as an amend- 
ment to Article 10 of the original project, a new article relative to 
the relation of the countries of the union to foreign countries. The 
German delegation proposed a new motion which would determine 
the condition of entrance into the union of countries overseas that 
were not yet members, and Mr. Stephan offered, at the same time, 
to replace Article 11 of the project with the following provisions: 

The postal Administrations of the various countries com- 
posing the Union are competent to draw up by common con- 
sent in the form of detailed regulations all the measures of 
order and detail necessary with a view to the execution of the 
present convention. It is understood that the stipulations of 
these detailed regulations may always be modified by the com- 
mon consent of the Administrations of the Union. 

The several Administrations may make among themselves 
the necessary arrangements on the subject of questions which 
do not concern the Union as a whole, such as the regulation 
of exchange at the frontier, the determination of radii in ad- 
jacent countries within which a lower rate of postage may be 
taken, the conditions of the exchange of post office money 
orders and of letters with declared value, etc., etc.57 


These provisions which were to form the new Article 12 were 
adopted. 

At the close of the fifth session of the Congress (September 23) 
practically all of the basic questions relative to the organization of 
the proposed postal union had been discussed. The original project 
had served surprisingly well in meeting the views of the delegates. 
Of some sixteen articles in both convention and réglement dealing 
with matters of organization that were considered to the end of the 
fifth session, only four offered conflicts of opinion that it was neces- 
sary to refer to committees to harmonize. Each of these, moreover, 
dealt with a matter that the original project had not touched—the 
organizations and functions of the international bureau. The sixth 


[29 ] 


416 


session (September 24) opened with a motion on the part of the 
General Commission to replace Article 10 of the original project 
(regulating relations with countries foreign to the union) with an 
article to be designated Article 11. The first two clauses of the new 
proposal provided: 
The relations of the countries of the Union with countries 
foreign to the Union shall be regulated by separate conven- 


tions which now exist or which may be concluded between 
them. 

The rates of postage chargeable for the conveyance beyond 
the limits of the Unions shall be determined by those conven- 
tions; they shall be added, in such case, to the Union rate.*8 


The remainder of the article made provision for the apportion- 
ment of the union rates, principally as between the dispatching and 
the receiving offices, and without opposition was adopted. At the 
same time an article (16) was proposed by the General Commission 
relative to the admission to the Union of overseas countries not yet 
members. It required that such countries deposit a declaration of 
intentions in the hands of the administration charged with the super- ~ 
vision of the international bureau. They should declare acceptance 
of the provisions of the union convention, pending ultimate arrange- 
ments on the question of charges for maritime transport. Their ad- 
hesion to the union must be preceded by an understanding among the 
Administrations having postal conventions or direct relations with 
them; such an understanding to be reached, if necessary, in a con- 
ference of the interested administrations and the administration de- 
siring admission. The agreement established, the supervising ad- 
ministration was required to notify all members of the union to this 
effect. If after a period of six weeks from the date of such com- 
munication no objections were presented, the adhesion was to be 
considered as accomplished, and the process completed by a diplo- 
matic act between the government of the supervising administration 
and the government of the administration thus admitted to the 
union.®* Without serious amendment, the article was adopted, and 
the President then consulted the Congress as to the proper title to 
give to the completed convention. It was agreed to describe the 
document as follows: 


Treaty concerning the formation of a General Postal Union 
concluded between (enumerating the States and Administra- 


tions): 
[30 J 


417 


The undersigned, duly authorized to this effect, have by 
common consent, and subject to ratification, agreed upon the 
| following stipulations:®° 


SS eee 


‘It was further determined that a copy of the treaty with all sig- 
natures should be furnished to the representatives of each state or 
administration. And with a unanimous vote of nineteen ballots 
' (France and Great Britain not voting) the Congress then chose Paris 
‘as the place for its next meeting. 

It was at the eighth session (September 30) that the réglement 
| @exécution now designated Réglement de détail et d’ordre was re- 
| ported from the commission charged with its consideration. The 
“first sixteen articles dealt almost entirely with matters of postal 
| technicalities, and were adopted (except article 12) with little dis- 
| cussion.*t Article 17 as reported at this time embraced the provi- 
|sions for the international bureau, i. e., what had formerly been 
| debated as Articles a to g of the réglement. Their modification at 
| this session was slight. The expenses of the bureau were raised from 
| 50,000 to 75,000 francs, principally, it seems, because of the antic- 
ipated services of a number of translators. In the section dealing 
| with the classification of states for purposes of the allocation of ex- 
'penses, the United States was placed in the first class, Egypt in the 
| third, and Portugal in the fourth. The commission proposed to set 
| the first six months of each year as the period in which to send sta-~ 
_ information to the international office. It likewise recom- 
| mended that the bureau, in preparing the formulas for this purpose, 
ltake into consideration the suggestions adopted in 1872 by the 
|Statistical Congress meeting at that year in St. Petersburg. This 
| recommendation, however, was consigned to the procés-verbal only. 
| The remainder of the paragraphs (nine to sixteen) of Article 17 were 
| adopted as formerly prescribed with only slight modifications. The 
| suggestion that the journal be edited in English, German, and French 
'was retained, and the administration of the country in which the 
|mext congress was to take place was directed to prepare with the 
|\atd of the international office, the work to be considered at the meet- 
jing. The President then asked the assembly if it would designate 
at this session the administration to be charged with organizing the 
international bureau. The question being resolved in the affirma- 
tive, the Congress proceeded to a selection by secret ballot. On the 
first count twenty-one votes were returned. Belgium received ten 


[31 J 


418 ) : 


: 


and Switzerland ten. There was one blank. A new ballot was at 
once ordered, and the results were nine votes for the Belgian adminis- 
tration and twelve for the Swiss administration. To Switzerland, 
therefore, was charged the organization of the international bureau. 

At the ninth session (October 1) the treaty was again taken up 
and Articles 1, 7, 8, 9, II, 12, 13, 14, 15, 16 and 17 were adopted 
without discussion. In considering Article 18 (now Article 19 
embodying the time and duration of the treaty) it was proposed to 
reduce the term fixed for the entering into force of the treaty to six 
months, it being felt that the delay of nine months to July 1, 1875, 
was too long a period. The motion, however, was rejected, and the 
article adopted without modification. Article 19 (the new Article 
20—the last one in the convention and the one providing for ratifi- 
cation) was amended by requiring that the act of ratifications should 
be exchanged at Berne. And at the twelfth session (October 9) the 
President invited the assembly to pronounce on the adoption of 
the completed document. The vote was taken by acclamation, 
and the treaty accepted unanimously.® 

It remained for the Congress to complete the discussion of the 
additional articles of the réglement. This was undertaken at the 
tenth session (October 2), and the remainder of the provisions dis- 
posed of without difficulty. Article 18 provided for the relation of 
certain dependencies to the union, and in the discussion of the 
article it was requested by Mr. Pilhal, supplementary delegate 
of Austria-Hungary, that Montenegro, although not represented aa 
the Congress, be permitted to become part of the union by a simple 
declaration of adhesion to all stipulations of the treaty. This mo- 
tion was accepted, whereupon Mr. Pilhal further stated that the 
principality of Lichtenstein, whose postal service was dependent 
upon the Austrian administration, should be permitted to enjoy} 
the benefits of the treaty. This declaration met with no opposition.| 
Mr. Lessa, delegate of Portugal, then requested that in the article 
under discussion the phrase comme dépendances du Portugal be re- 
placed by comme faisant partie du Portugal, and Mr. Navasgqiies, 
delegate of Spain, made a similar request regarding the Spanish 
dependencies. Both motions were accepted. The articles were 
adopted with modifications, ®* and with few objections the remainder 
of the provisions were approved.* 

The eleventh session (October 6) was given toa final consideration| 


[ 32 J 


419 


of the réglement. Article XXVII (now dealing with the international 
_ bureau) was amended to provide that the bureau should commence 
| to function immediately after the exchange of ratifications of the 
_ treaty, and it was made more definite that additional copies of the 
journal to be issued by the bureau should be furnished at the request 
_ of the administrations.£7 Great Britain requested during the con- 
| sideration of Article X XIX (relative to the jurisdiction of the union 
_ over dependencies) that the island of Malta be mentioned as sub- 
_ ordinate to the postal administration of Great Britain.6* This was 
_ adopted, and upon the proposal of the President a vote was taken 
on the réglement as a whole. It received the unanimous approval 
_ of the delegates. 9 
| This practically completed the work of the Congress. At the 
| twelfth session (October 7) Mr. Besnier, delegate of France, again 
' expressed his regrets that his government was not at that time able 
| to sign the convention.” The President proposed, however, that a 
| place be reserved for the signature of France in the appropriate place 
| on the treaty on the same terms as the other countries. The sug- 
_ gestion was unanimously approved. The thirteenth session (October 
| 9, first session) was given to the adoption of a final protocol pro- 
_ viding that in case the French government failed to sign, the treaty 
| was nevertheless obligatory upon all the other parties. And the 
fourteenth and closing session (October 9, second session) was de- 
_ voted to addresses expressive of the satisfaction of the work of the 
| Congress and of the hopes of a new international order.” 
| Viewed as an experiment in a new postal relation, the work of the 
Congress was revolutionary. It had reduced the maze of conflicting 
administrations to a single postal territory for the reciprocal exchange 
of correspondence between their post offices.”2 It had fixed the 
' general union rate at twenty-five centimes for a single prepaid letter, 
but as a ‘measure of conversion”’”’ the option was reserved to each 
country, to levy a higher or lower rate to suit its monetary or other 
| requirements, provided it did not exceed thirty-two centimes or go 
below twenty centimes. It proclaimed the simple definition that 
| every letter which did not exceed fifteen grammes in weight was to 
be considered a single letter, and the charge upon letters exceeding 
that weight was to be increased by the single rate for every additional 
fifteen grammes or fraction thereof.74 The rates on commercial 
documents, newspapers, books, pamphlets, music, visiting cards, 


faa 


i 


420 


catalogs, etc., were disposed of on a similar basis—seven centim 
for a single packet (i. e., not exceeding fifty grammes), with th 
option of altering such rate within the range of five and eleven cen 
times, inclusive, the charge to increase by the single rate for ea 
additional unit of fifty grammes.7® 

Article IX started with the significant provision that “‘Each Ad- 
ministration shallkeepthe whole of thesums whichitcollects 
Consequently, there will be no necessity on this head for any accounts 
between the several Administrations of the Union.”” And the suc- 
ceeding article added the equally important concession: ‘‘The 
right of transit is guaranteed throughout the entire territory of the 
Union.”’7§ Such privilege was not, however, gratuitous, but it was 
placed on a uniform basis that indicated a new relationship: 


The dispatching office shall pay to the Administration of — 
the territory providing the transit the sum of two francs per 
kilogramme for letters and twenty-five centimes per kilo- 
gramme for the several articles specified in Article 4 [i.e., com- 
mercial documents, newspapers, books, pamphlets, music, 
visiting cards, catalogs, etc.]| . . . This payment may be 
increased to 4 francs for letters and to 50 centimes for the 
articles specified in Article 4, when a transit is provided of more ~ 
than 750 kilometers in length over the territory of one Ad- 
ministration.?7 


To ascertain the weight of the correspondence forwarded in tran 
sit, it was provided that at certain times to be determined by com 
mon agreement, there should be statistics taken over a two weeks 
period, the results of which should serve as a basis of the accounts 
of the administration until a revision might take place.78 

The remainder of the Treaty (Articles XI-XX) as well as the con- 
cluding articles of the Detailed Regulations (XXVII-XXX) dealt 
directly or indirectly with matters of organization. There was n¢ 
essential change from the earlier decisions of the Congress. It ree 
mained only to give effect to the principles through actual applica- 
tion to the affairs of the Union. Article XI provided for the reg 
lation of the relation of the countries of the Union with foreign 
countries, and was placed in the completed treaty substantially 
as adopted at the sixth session, September 24. Article XIV,” pro= 
viding that the stipulations of the present convention should in= 
volve no alteration in the interior postal legislation of any country, 
nor restrict the right of the contracting parties to maintain and 


[34] 


421 


conclude treaties as well as to provide for more restricted unions, 
was identical with the Article 12 of the second session. Article XV 
established the International Bureau: 


Article XV 


There shall be organized, under the name of the Interna- 
tional Office of the General Postal Union, a central office, 
which shall be conducted under the surveillance of a Postal 
Administration to be chosen by the Congress, and the ex- 
penses of which shall be borne by all the Administrations 
of the contracting States. 

This office shall be charged with the duty of collecting, 
publishing, and distributing information of every kind which 
concerns the international postal service; of giving, at the 
request of the parties concerned, an opinion upon questions in 
dispute; of making known proposals for modifying the detailed 
regulations; of giving notice of alterations adopted; of facilitat- 
ing operations relating to international accounts, especially 
in the cases referred to in Article 10 foregoing; and in general, of 
considering and working out all questions in the interest of the 
Postal Union.®° 


It remained for the Réglement (XXVII) to supply the details. 
Here is presented the numerous decisions of the Congress relating 
to organization and functions, the apportionment of expenses, the 
duties of the Bureau as a medium for communication between the 
various countries of the Union and of its relation to the succeeding 
Congresses. Article XVI of the Treaty contained all clauses agreed 
upon at the plenary sessions pertaining to the matter of arbitral 
procedure: 
Article XVI 


In case of disagreement between two or more members of 
the Union as to the interpretation of the present treaty, the 
question in dispute shall be decided by arbitration. To that 
end, each of the Administrations concerned shall choose another 
member of the Union not interested in the affair. 

The decision of the arbitrators shall be given by an absolute 
majority of votes. 

In case of an equality of votes the arbitrators shall choose, 
with the view of settling the difference, another Administration 
equally disinterested in the question in dispute.* 


Article XVII provided for the entrance into the Union of coun- 
tries beyond the sea which did not at that time form part of it. 


[35] 


422 


It was, with slight alteration in phraseology, the Article 16 of the 
sixth session, September 24. And Article XVIII brought together 
the regulations that the Congress had approved relative to its or- 
ganization and procedure: 


Article XVIII 


Every three years at least, a Congress of plenipotentiaries 
of the countries participating in the treaty shall be held with 
a view of perfecting the system of the Union, of introducing 
into it improvements found necessary, and of discussing com- 
mon affairs. 

Each country has one vote. 

Each country may be represented either by one or several 
delegates, or by the delegation of another country. 

Nevertheless, it is understood that the delegate or delegates 
of one country can be charged with the representation of two 
countries only, including the one they represent. 

The next meeting shall take place at Paris, in 1877. 

Nevertheless, the meeting may be held sooner, if a request 
to that effect be made by one-third at least of the members of 
the Union.*® 


— — ge oe 


Article XIX stipulated that the treaty come into force July 1, 
1875, that it be concluded for a period of three years from that date, — 
and that when such time had expired, it be considered as indefinitely — 
prolonged, but each contracting party reserved the right to withdraw : 
from the Union on giving notice one year in advance. ; 
It remained for Article XX to conclude the agreement. It an- 
nulled (after July 1, 1875) all stipulations in special treaties existing — 
between the various countries and administrations in so far as they 
might be at variance with the terms of the new agreement. It pro- ; 
vided, further, that the treaty be ratified as soon as possible, and © 
at the latest, not later than three months previous to the date on © 
which it was to come into effect— ; 
4 


In faith of which, the plenipotentiaries of the governments 
of the countries above enumerated have signed it at Berne, 
the ninth of October, 1874.8 ; 


And there followed the signature of each country attending the 4 
Congress, with the single exception of France.* 


[ 36 J 


q 


423 
NoTEs AND REFERENCES 

1 United States Official Postal Guide, 1926, p. 183. 

2League of Nations, Treaty Series. Vol. XL (1925-1926), No. 1002, 
Universal Postal Convention with other Relevant Instruments, signed at 
Stockholm, August 28, 1924. Art. I. 

3 Tbid., Art. 69. 

4 Tbid., Art. 25. 

5 Jind., Art. 75. 

Siind., Pt. 1, Ch. I. 

7 Tbid., Pt. I, Art. 10. 

87bid., Pt. I, Ch. II, Arts. 12-17. 

9 Thid., Pt. I, Ch. IV, Arts. 23-24. 

10 Bibliotheque du Bureau International de l'Union Postale Universelle. 
Ouvrages sur le Service des Postes. Berne, 1913. Supplémeni (typed), 
1913-1926; Library of Congress. Division of Bibliography. List of 
References on the Universal Postal Union (April 24, 1923). 

UL’Union Postale Universelle . . . Mémoire Publié par le Bureau 
International a l'occasion du 50e anniversaire de l’union, 1874-1924. 

2 Thirty-seventh Congress, third session, House of Representative, 
Executive Document No. 1, Pt. 4, serial number 1159. Report of the 
Postmaster-General, r861-62, Appendix No. Io, pp. 165-168. 

13 Fifty-fourth Congress, first session, House of Representatives, Docu- 
ment No. 4. Serial number, 3380. Report of the Postmaster-General of 
the United States, 1894-95. P. 449. . 

MT’Union Postale . . . Mémoire . . . op. cit., Annexe II, 132, 
136, 137. I centime = about }{ cent; 15 grammes = about % ounce. 

15 T’ Union Posiale, XV, 6 (1 June 1890), Past and Present, pp. 85, 86, 
87, 90. Weithase, Hugo. Geschichte des Weltpostvereins. Strassburg, 
1895. P.26. One pfennig = about 134 centimes. 

16 Krains, Hubert. L’union postale universelle, Sa fondation et son dé- 
velopment. Berne, nouvelle édition, 1908. Pp. 9, 22; Weithase, op. cit., 
25, 27. 

W Report of the Postmaster-General of the United States, 1861-62, op. 
cit., 121; tbid., 1894-95, op. cit., 449-50. 

8) Union Postale Universelle . . . Mémoire . . . op. cit. Annex 
III, 140, 142; Jung, J. Der Weltpostiverein und sein Einfluss auf den Welt- 
verkehr und die Weltwirtshaft. Strassburg, 1903. Pp. 4-5. 

19 Weithase, op. cit., 28. It is probable that cumulating difficulties in 
postal administration prompted the United States to take the initiative 


Baga 


424 


at this time. A service accustomed from the beginning to show a steady 
development, found itself embarrassed by a combination of circumstances 
that left a wake of deficits. The sudden and difficult extension made 
necessary by the Treaty of Guadaloupe Hidalgo (1848), had added to 
an already attenuated system a vast new country teeming with immi- 
grants demanding means of postal communication. [Ill-timed, perhaps, 
in view of this circumstance, came the reduction of postal rates under the 
reform act of March 3, 1851 (United States Statutes at Large, vol. IX, 
c. XX, 589-91), and with it a policy heretofore avoided in the United 
States of establishing post routes regardless of their financial productivity, 
(ibid., sec. 7). The Civil War caused a great reduction in the amount of 
foreign postage—a total of $217,940.88 during the first year alone. 
Indeed, the decade from 1854 to 1863 showed an unbroken annual deficit,» 
arising in 1859 to almost $7,000,000. (Thirty-eighth Congress, first ses- 
sion, House of Representatives, Executive Document No. 1. Serial 
number 1184. Report of the Postmaster-General of the United States, 1862— 
1863, p. 45; tbid., 1861-62, op. cit., p. 121; L’Union Postale, XIV, 9 (1 
September 1889, A Hundred Vears of Postal Statistics, 145-149). 


20 They were: Austria, Belgium, Costa Rica, Denmark, Spain, United 
States, France, Great Britain, Italy, Netherlands, Portugal, Prussia, 
Sandwich Islands (Hawaii), Switzerland, and the Hanseatic Towns. 
L’Union Postale Universelle . . . Mémoire . . . op. cit., Annex I, 
Conference de Paris, 1863. Postmaster-General Blair (Report of Post- 
master-General, 1862-63, op. cit., p. 9) explains ‘It is my intention to 
publish a translation of the record of the conference [i.e., 1863] as an ap- 
pendix to this report.’’ A careful search, however, failed to find such a 
record. Weithase cites the documents used in the preparation of his work 
as Die im eidgendssischen Archiv in Bern verliegenden Protokolle der Pariser 
Konferenz von 1863 (Weithase, op. cit., Quellengabe, 183). Krains cites 
Documents de la Conference de Paris de 1863 (Krains, op. cit., 12). Myers 
(Manual of Collections of Treaties and of Collections Relating to Treaties, 
Cambridge, U. S. A., 1922) cites the Paris Conference of 1863 (p. 457) 
but lists no documents pertaining thereto. A search in the leading deposi- 
tories of the United States has failed to locate a copy. 


21 Mr. Vandal spoke, in part, as follows: The purpose of the conference 
was ‘‘non de discuter ou régler certains faits pratiques qui appartiennent 
au domaine de la négociation et pour lesquels nous commes, d’ailleurs, 
sans pouvoirs, mais de nous mettre d’accord, ou du moins de discuter et 
de proclamer certaines principes généraux, certaines doctrines spécula- 
tives, que nous nous effocerons de faire prévaloir plus tarde dans !’intérét, 
bien entendu, du public et du trésor de nos gouvernements respectifs.” 
Kraines, op, cit,, 13; Weithase, op. cit., 29-32; Schréter, Carl, Der Welt- 


[38 J 


425 


postverein, Geschichte seiner Griindung und Entwicklung in 25 Jahren. 
Bern, 1900, Pp. 4-7. 

2 Résultat des Délibérations de las commission internationale des Postes, 
cited, Weithase, op. cit., 31, note. For a copy of the thirty-one articles 
see Report of the Postmaster-General, 1862-63, op. cit., 7-9; Krains, op. cit., 
15-18, note; L’Umion Postale Universelle . . . Memoire, op. cit., 10-12, 
note. 

23 Reinsch, Paul S. Public International Unions, their work and organiza- 
tion. Boston and London, tg1r. P. 22. 


% Documents du Congrés Postal International, réuni a Berne du 15 Sep- 
tembre au 9 Octobre 1874. Address of Mr. Blackfan, delegate of the United 
States, p. 36. These documents are also reprinted Archives Diplomatiques 
(Paris, 1861-), 1875, IV, pp. 143-270. 

2 Staudiner, Julius von. Sammulung von Siaatsvertragen des deutschen 
Reichs tiber Gegenstande der Rechtspflege. Nordlingen, 1882, Weltpost- 
verkehr, 299-340, 412; L’ Union Postale, 1, 2 (1 November 1875), History 
of the General Postal Union, 23-24. 

26 T’ Union Postale, ibid., 1. Wolf, L. S. International Government. 
N. Y., 1916. P. 189. 

27 Veréffenlicht in Nv. 15 des Amtsblatis der Deutschen Reichs-Postver- 
waltung von 1871. Cited Meyer, A. Die deutsche Post im Weltpostverein 
und im Wechselverkehv. Berlin, 1902. P. 5, note. 


% Documents du Congrés . . . 1874. Remarks of Baron de Velho, 
delegate of Russia, p. 17. The governments notified were: Belgium, 
Denmark, Germany, France, Great Britain, Greece, Italy, Netherlands, 
Austria, Portugal, Russia, Spain, Sweden, Turkey, and the United States. 


_ France and Turkey likewise assumed uncertain positions. No response 


was received from Turkey. France continued to base her objections on 
financial reasons. Weithase, op. cit., 39. 


% Schréter, op. cit., 9; Weithase, op. cit., 41; Documents du Congrés 
. . 1874. Address of Mr. Eugéne Borel, 131. 


30 Documents du Congrés . . . 1874, pp. 11-12. The United States 


| delegate, Mr. Blackfan and his fonctionnaire attaché, Mr. Rambusch, did 
| not arrive until the third session (September 21). At that time, also, 


Austria was supplemented by a second delegate, Mr. Pilhal, and at the 
seventh session (September 29) Hungary received an additional delegate, 
Mr. Heim. This made a total of forty representatives participating in 
the congress, thirty-three of which sat as delegates. Documents du Con- 


| gres . . . 1874, pp. 35, 69. 


31 They were: Germany, Austria-Hungary, Belgium, Denmark, Spain, 
Luxemburg, Norway, Netherlands, Portugal, Russia, Sweden, and Switzer- 


land, Documents du Congrés . . . 1874, p, 20. 


[39 J 


426 


32 Egypt, France, Great Britain, Greece, and Roumania. Jbid., 20. 
The United States delegate likewise lacked diplomatic powers (ibid., 36). 
r 


33 In each instance (except in the case of France) such powers were re- 
ceived: Documents du Congrés . . . 1874, Serbia and Turkey (55), 


Roumania (70), Egypt (54, 73-74), United States (85), Italy (100), Great 
Britain and Greece (109). France did not sign the convention at the 
conclusion of the congress. 


34 Documents du Congres . . . 1874, pp. 15-16. The text of these 
rules is as follows: 


REGLEMENT POUR LES CONFERENCES 


Art. I 


Chaque Etat ou Administration peut se faire représenter soit par 
un ou par plusieurs délégués, soit par la délégation d’un autre Etat ou 
Administration. 

Toutefois il est entendu que le délégué ou les délégués d’un Etat 
or Administration ne pourront étre chargés que de la representation de 
deux Etats ou de deux Administrations, y compris celui ou celle 
qu’ils représentent. 

Aria 2 


Les fonctionnaires attachés aux membres délégués sont admis aux 
séances, mais sans avoir le droit de prendre la parole, ni de prendre 
part a la votation. 

Art. 3 


La langue francaise est adoptée pour les discussions et pour les 
actes de Conférences. 
Art. 4 


Le projet de convention communiqué aux Etats et Administrations 
sert de base pour les délibérations. 


Art. 5 


Tout délégué peut prendre part 4 la discussion des propositions 
soumises a la Conférence. 

Pour la votation, chacun des Etats et des Administrations con- 
tractants a droit A une voix et a une seule, soit que plusieurs délégués 
représentent un méme Etat ou une méme Administration, soit que 
deux Etats ou Administrations aient une représentation unique. 

Le délégué qui serait empéché par maladie d’assister 4 la Con- | 
férence aura la faculté de charger de sa voix la délégation d’un autre 
Etat ou Administration. 

Art. 6 


En régle générale, on ne reproduit, dans les procés-verbaux, que 
la marche générale de la séance, l’indication des propositions avec 
un résume des motifs a l’appui et le résultat des délibérations. 

Toutefois, chaque délégué a le droit de réclamer l’insertion an- 
alytique ou in-extenso, au procés-verbal, de toute déclaration qu’il © 
a faite, mais, dans ce cas, il est tenu de la fournir lui-méme par écrit, 
dans la soirée qui suit la séance. 


[40 ] 


427 
Art. 7 


Chaque proposition mise en délibération est soumise a la votation. 
Le vote a lieu par appel nominal et suivant l’ordre alphabétique 
‘des Etats ou Administration représentés. 


Art. 8 


Le Congrés peut renvoyer au prévois des commissions spéciales 
les questions soumises a sa délibération. Chaque membre du Con- 
grés a le droit d’assister aux séances des commissions sans toutefois 
prendre part a la discussion. 


Art. 9 


Le résult des délibérations du Congrés sera résumé dans un projet 
de convention qui fera l’object d’un vote d’ensemble. 


Art. Io 


L’adoption de la convention mentionnée 4 I’article précédent reste 
subordonnée 4l’approbation des Gouvernements contractants,échangée 
dans les formes ordinaires. 


35 The delegations chosen were: Germany, Austria-Hungary, Belgium, 


Egypt, Italy, Netherlands, Portugal, Russia, Sweden, and Switzerland. 


France and Great Britain were at first designated, but declared that their 
powers did not permit them to accept such an appointment Documents 
du Congrés . . . 1874, pp. 16-17. 


36 Documents du Congrés . . . 1874, pp. 3-7. The text of these articles 
is as follows: 


PROJET PRIMITIF 


Presenté 
Par L’Administration des Postes D’Allemagne 
et communiqué aux Etats et Administrations 
invités a se faire représenter 
Au Congrés 
Union Général des Postes 


Art. I 


Les Etats participant 4 la présente convention seront considérés 
formant un seul territoire en ce qui concerne l’échange réciproque 
des correspondances entre leurs bureaux de poste. Ils seront dé- 
signés par le nom commun: ‘“‘ Union générale des Postes.” 


Art. 12 


Les stipulations de la présente convention ne portent ni altération 
4 la législation interne de chaque pays, ni restriction au droit des 
parties contractantes de conclure des traités ainsi que d’établir des 
unions plus restreintes en vue d’une amélioration progressive 
des rapports postaux. 
[41] 


428 


En conséquence, il ne sera porté, par la présente convention, 
aucun préjudice aux confédération postales existant déja entre 
quelques territoires, pour ce qui touche les stipulations sur l’échange 
réciproque d’envois entre les pays en cause. 


Art. 13 


Dans le cas de dissentiment entre deux ou plusieurs membres de 
l'union relativement a l’interprétation de la présente convention, 
la question en litige devra étre réglée par jugement arbitral; A ces 
fins, chacune des Administrations en cause choisira un autre membre 
de l’Union qui n’est pas intéressé dans I’affaire. 

La décision des arbitres sera donnée 4 la majorité absolue des voix. 

En cas de partage des voix, les arbitres choisiront, pour trancher 
ac inl oats une autre Administration également désintéressée dans 
e litige. 


Art. 14 


Tous les trois ans au moins, un Congrés de plénipotentiaires des 
participants au traité sera reuni en vue de perfectionner le systtme 
de l|’Union, d’y introduire les améliorations jugées nécessaires et de 
discuter des affaires communes. 

Chaque Etat sera représenté par une voix. Les pays qui ne se 
feraient pas directement représenter au Congrés auron la faculté de 
transférer leur voix 4 un autre membre de 1|’Union. 

On fera choix, 4 chaque Congrés, de l’endroit ot le Congrés suivant 
devra avoir lieu. 

Il ne pourra étre apporté aucune modification a la présent conven- 
tion en ce qui touche les tarifs et la question du transit si ce n’est 
a l’unanimité des voix'des pays de |’Union représentés au Congrés. 


ee 


37 The project was composed of fourteen articles. In addition to provi- — 
sions relative to international organization the remainder of the document ~ 
dealt with more technical matters of postal reform. There was a classifica- | 
tion of postal articles (Art. 2), provisions for uniformity of postal rates — 
(Art. 3), miscellaneous proposals pertaining to matters of dispatch and 
reception (Arts. 4-8), and arrangements for the allocation of receipts, for | 
gratuitous transit, and for the abolition of international accounts (Art. 
9). Articles 10 and 11 provided for the relation of foreign countries to | 
countries of the union. : 


38 It is of interest to note, however, that the first address made to the 
organized congress came from the Turkish delegate, Yanco Effendi Macridi, 
asking for the definite and total suppression ‘‘de certain anomalies mal- 
heureusement aussi nombreuses que regrettables’’ which existed in the Orient | 
in connection with the postal service; namely, the maintenance of foreign | 
post offices within Turkish territory. Documents du Congrés . . . 1874, 
pp. 20-22. The view of the Congress was, however, that such a question 
was beyond its competence, and moreover, of a limited interest to the | 
assembled delegates. The president so ruled and declared the incident 
closed. Jiid., 23. 

[42] 


429 


39 Documents du Congres . . . 1874, pp. 24, 32. 


40 Ibid., 32. The text was as follows: Les stipulations de la présente 
convention ne portent ni altération a la législation postale interne de 
chaque pays, ni restriction au droit des parties contractantes de maintenir 
et de conclure des traités ainsi que de maintenir de d’établir des Unions 
plus restreintes, en vue d’une amélioration progressive des rapports 
postaux. 


41 The International Telegraph Union was the first important interna- 
tional administrative union to be established. It was formed on the 
invitation of France at a conference held in Paris in 1865. Twenty states 
were represented by their diplomatic agents in Paris, assisted by expert 
delegates. The first regular conference took place at Vienna, June, 1868. 
Its most important act was the establishment of a bureau having its seat 
at Berne, and acting as a central organ of the union. The bureau began 
operation on January 1, 1869, under the supervision of the Swiss govern- 
ment. Its duty was to collect information concerning international teleg- 
raphy, to attend to requests for changes in rates and service, and to give 
notice of such changes, and to make special studies and investigations of 
interest to the union. Reinsch, Paul S. Public International Unions, op. 
cit., 15-19; Moynier, Gustave. Les Bureaux Internationaux des Unions 
Universelles. Genéve, 1892. Bureau International des Administrations 
Télégraphiques, pp. 13-36; Roland, Louis. De la correspondance postale 
et iélégraphique dans les relations internationals. Paris, 1901; Poinsard, 
Léon. Etudes de Droit International Conventionnel. Premiére série. Paris, 
1894. Pp. 278-303. For treaty see Archives Diplomatiques, (Paris, 
1861-), 1869, I, 176-203, for documents, ibid., 204-210. 


_ 2 Documents du Congrés . . . 1874, pp. 32-33. 


| 43 Tbid., 55. It was announced, however, at the third session that Mr. 
Vinchent had deposited in the bureau of the Congress a proposal for the 


creation of an international office similar to that of the International 
Telegraph Union. Documents du Congrés . . . 1874, p. 43. 


“4 Documents du Congrés . . . 1874, p. 55. The text of these articles 
reads as follows: 


Art. 13 


Une Administration postale, désignée par le Congrés, prendra les 
mesures propres a faciliter, dans un intérét commun, l’exécution et l’ap- 
plication de la présente convention. 

Elle organisera, sous le nom de Bureau international des Adminis- 
trations postales, un service central qui fonctionnera sous sa haute 
surveillance, et dont les frais seront supportés par toutes les Ad- 
| ministrations des Etats contractants. 

Ce bureau sera chargé de coordonner, de publier et de distribuer 
les renseignements de toute nature qui intéressent le service interna- 


[43 ] 


————= == 


430 


tional des postes, d’émettre un avis sur les questions litigieuses, 
d’instruire les demandes de modification au réglement d’exécution, 
de notifier les changements adoptés, de faciliter les opérations de 
la comptabilité internationale, notamment dans les relations prévues — 
a l’art. Io ci-dessus et, en général, de procéder aux études et aux 
travaux dont il serait saisi dans l’intérét de |’Union postale. 


Art. 14 (13 ancien) 

En case de dissentiment entre deux ou plusieurs, membres de 
l'Union dans |’interprétation de la présente convention, la question 
en litige sera soumise, en premiére instance, a l’avis motivé du Bureau 
international institué par l’article précédent. 

Si l’accord ne peut s’établir conformément a cet avis, la question 
sera réglée par jugement arbitral et . . . (le reste comme au projet). 


45 Documents du Congrés . . . 1874, pp. 55-56. The text read as 

follows: Il sera organisé sous le nom de Bureau international de 

l'Union générale des postes un service central qui fonctionnera sous 
la haute surveillance d’une Administration postale désignée par le 

Congrés, et dont les frais seront supportés par toutes les Administra- 

tions des Etats contractants. 

46 The delegates of France and Great Britain took no part in the voting 
after the opening session of the Congress. Documents du Congrés . 
1874, p. 54, note. f 

47 The amendment read, dans le cas on cet avis lui est demandé. Docu 
ments du Congrés . . . 1874, p. 56. 


48 Tbid., 56. The motion of Mr. Lahovari received expression, a 
only in fe proces-verbal. 


—— ee Oo ee 


49 This was the classification adopted by the International Telegraph 
Union. The proposal classified the states as follows: First class, German 
Austria-Hungary, France, Great Britain, Italy, Russia, and Turkey 
second class, Spain; third class, Belgium, Netherlands, Roumania, and 
Sweden; fourth class, Denmark, Norway, and Switzerland; fifth class 
Greece, Portugal, and Serbia; sixth class, Luxemburg. | 


50 At the end of the third session (September 21), the president propose 
a special commission to prepare a réglement d’exécution (Documents du 
Congrés . . . 1874, p. 43). The motion was adopted and the following 
delegations were placed upon it: Germany, Austria-Hungary, Belgium, 
Spain, Norway, Netherlands, Roumania, Russia, Serbia,and Switzerlan 
At the fifth meeting (September 23) Mr. Hofstede, delegate of the Nether, 
lands, reported the commission to be organized with himself as president, 
Mr. Poggenpohl, delegate of Russia, as rapporteur, and Mr. Steinhauslin, 
Secretary-General of Swiss Posts, as secretary, (Ibid., 59). | 

51 Documents du Congrés . . . 1874, p. 58. 

52 Thid., 58. 


[44] 


431 


Documents du Congres . . . 1874, p. 58: The text read as follows: 


Le Bureau international devra se tenir, en tout temps, a la disposition 
des membres de |’Union, pour leur fournir, sur les questions relatives 
au service international des postes, les renseignements spéciaux dont 
ils pourraient avoir besoin. 

Lorsqu’il sera soumis aux Administrations la solution d’une ques- 
tion qui réclame |’assentiment de tous les membres de l’Union postale, 
ceux qui n’auront point fait prevenir leur réponse dans le délai de 
quatre mois seront considérés comme consentants. 


54 Documents du Congrés . . . 1874, p. 58. 


55 Documents du Congrés . . . 1874, pp. 59-60. The text of the articles 
reads as follows: 
Article 16 


Tous les trois ans au moins, un Congrés de plénipotentiaires des 
pays participants au traité sera réuni en vue de perfectionner le systéme 
_ de l'Union, d’y introduire les améliorations jugées nécessaires et de 
_ discuter les affaires communes. 

Chaque Etat ou Administration a une voix. 

| Chaque Etat ou Administration peut se faire représenter, soit par 
un ou par plusieurs délégués, soit par la délégation d’un autre Etat 
ou Administration. 

Toutefois, il est entendu que le délégué ou les délégués d’un Etat 
ou Administration ne pourront étre chargés que de la représentation de 
_ deux Etats ou de deux Administrations, y compris celui ou celle qu’ils 
_ représentent. 
| La prochain réunion aura lieu en 1877 a. . 

Toutefois, l’époque de cette réunion sera avancée, sila demande 
en est faite par le tiers au moins des participants. 
} 


Art. 17 


La présent convention entrera en viguer le 1% juillet 1875. 

Elle est conclue pour un terme de trois ans aprés cette date. Passé 
ce terme, elle sera considérée comme indéfiniment prolongée, mais 
chaque partie contractante aura le droit de se retirer le 1’Union aprés 
trois ans, moyennant un avertissement donné une année a l’avance. 


Art. 18 


Sont abrogés, a partir du jour de la mise a exécution de la présente 
convention, toutes les dispositions des traités speciaux conclus entre 
_ les divers Etats et Administrations, pour autant qu’elles ne seraient 
_ pas conciliables avec les terms de la présente convention. 

| La présente convention sera ratifiée aussit6t que faire se pourra et, 
au plus tard, trois mois avant la date de la mise en exécution. 


| 568 The objection was that Article 18 might be considered as in contradic- 
ition to Article 12. This difficulty was avoided by adding the words sans 
prejudice des dispositions de L’article 12. Documents du Congres . 
1874, p. 60. 


[45] 


432 


57 Documents du Congres . . . 1874, p. 61. The text reads: 


Les Administrations postales des divers pays qui composent |’Union © 
sont compétentes pour arréter d’un commun accord, dans un régle- 
ment, toutes les mesures d’ordre et de détail nécessaires en vue de © 
l’exécution de la présente convention. II est entendu que les disposi- 
tions de ce réglement pourront toujours étre modifiées d’un commun 
accord entre les Administrations de |’Union. : 

Les différentes Administrations peuvent prendre entre elles les 
arrangements nécessaires au sujet des questions qui ne concernent — 
pas l’ensemble de l’Union, comme le réglement des rapports a la 
frontiére, la fixation de rayons limitropes avec taxe réduite, les condi- 
tions de l’échange des mandats de poste et des lettres avec valeur 
déclarée, etc., etc. 


58 Documents du Congrés . . . 1874, p. 64. The text reads: 


Les relations des Etats de l’Union avec des Etats étrangers 4 
l’Union seront réglées par des conventions particuliéres conclues ou a 
conclure entre les dits Etats. 

Ces conventions détermineront les ‘taxes 4 percevoir pour le trans- 
port au-dela des limites de l’Union, lesquelles taxes seront ajoutées, — 
le cas échéant, a la taxe de 1’Union. 


59Documents du Congres . . . 1874, p. 64. The text read: 


L’entrée dans l’Union des pays d’outre-mer n’en’faisant pas encore — 
partie sera admise aux conditions suivantes: 

1° Ils déposeront leur déclaration entre les mains de l’Administra- _ 
tion chargée de la gestion du Bureau international. 

2° Ils se soumettront aux stipulations du traité de l’Union, sauf 
entente ultérieure au sujet des frais de transport maritime. 

3° Leur adhésion a l’Union doit étre précédée d’un entente entre 
les Administrations ayant des conventions postales et des relations — 
directes avec 1’Administration qui désire adhérer. 

4° L’entente dont il est fait mention au |Par. 3] aura lieu, au besoin, — 
dans une réunion des Administrations intéressées et de l Administra ‘ 
tion qui désire adhére. Cette réunion sera convoquée par l’Adminis- ~ 
tration gérante. 4 

5° Cette entente établie, l’Administration gérante en fera com- — 
munication a tous les membres de |’Union générale des Postes. 

6° Sidans un délai de six semaines, a partir de la date de cette com- — 
munication, des objections ne sont pas représentées, l’adhésion sera 
considérée comme accomplie et il en sera fait communication par 
l’Administration gérante 4 1’Administration qui a adhére . 
L’adhésion définitive sera constatée par un acte diplomatique entre ~ 
le Gouvernement de |’Administration gérante et le Gouvernement 
de l’Administration admise dans 1’Union. 


60 Documents du Congrés . . . 1874, p. 65. 
Traité concernant la création d’un Union générale des postes, © 
conclu entre (enumeration des Etats et Administrations). 
Les soussignés, dtiment autorisés a cet effet, ont arrété d’un commun 
accord et sous réserve de ratification, les stipulations suivantes: 


[ 46 J 


433 


§ Article 12 dealing with the question of printed matter in the mails 
_was referred back to the commission for further action. Documents du 
: ese. . ~ 1874, p- 79- 

‘ See Traité concernant la création d’une Union Générale des Posies 
'. . . Traité, Documenis du Congres . . . 1874, pp. 139-148; also United 
States Statutes at Large, vol. XIX (1877): Treaty concerning the formation 
ofa General Postal Union . . . October 9, 1874, pp. 577-587. 


_ & Documents du Congrés . . . 1874, p. 127. France abstained from 
“voting. The treaty as adopted at the end of the ninth session (October 1) 
is printed as an annex to that session, Documents du Congrés . . . 1874, 
PP. 91-97. 

& Documents du Congrés . . . 1874, pp. 100, 102. 

85 The article read as follows: (Documents du Congrés, 1874, p. 100). 


Art. 18. 
Seront considérés comme faisant partie de l'Union générale des 
es: 
: ° L'Islande et les iles Faroe, comme faisant partie du Denmark. 


Yi) I 
2° Les iles Baléares, les iles Canaries, les possessions espagnoles de 


la cOte septentrionale d’Afrique et les établissements de poste de 
_ YEspagne sur la céte occidentale du Maroc, comme dépendances de 
_ YEspagne. 

3° L’Algérie, comme faisant partie de la France. 
4° Madére et les Acores, comme dépendances du Portugal. 
5° Le Grand-Duché de Finlande, comme faisant partie intégrante 
_ de l’Empire de Russie. 


° 


66 Documents du Congrés . . . 1874, pp. 102-108. The number of the 
articles of the réglemeni to this point have, in many cases, no significance 
in the completed document. At the end of the tenth session the Commis- 
sion announced a complete coordination and classification of all articles 
| for the next session. Many changes in order were made. 
: &7 Documenis du Congrés . . . 1874, pp. 112-113. 
_ 8 Jbid., 113, comme relevant de |’Administration postale de la Grande- 
| ae 

® The French delegation again abstained from voting. The Projet de 

| detail et d’ordre as considered at this time is printed as an annex to the 
: eleventh session (October 6), Documents du Congrés . . . 1874, pp. 
| EI4-124. 
| 70 At the eighth session (September 30) at the suggestion of Mr. Vinchent, 
‘the Congress had unanimously requested the French delegate to ask for 
new instructions of his government with a view to authorizing the signing of 
the convention with reservations. The French government replied, how- 


[47] 


434 


ever, that it would first be necessary to submit the questions raised at the 
Congress to the national assembly. But hopes were expressed that France 
would .ultimately join the union. Documents du Congrés . . . 1874 
pp. 82-83, 126. 


71 Documents du Congrés . . . 1874, pp. 131-136. 


7 Documents du Congrés . . . 1874. Traité Concernant la Création 
d'une Union Générale des Postes, pp. 139-148. Article I. Documents of 
the Congress may be found as follows: Protocol Final Relatif au Traité, 
Pp. 152; Réglement de détail et d’ordre pour l’exécution du traité concernant la 
création d’une Union Générale des Postes, pp. 155-164. The treaty was 
signed in the French language only, but English translations of each docu- © 
ment may be found in The Statutes at Large of the United States of America, 
vol. XIX (December, 1875 to March, 1877); Treaty concerning the forma- 
tion of a General Postal Union, signed at Berne, October 9, 1874, pp. 577-5873 
Final Protocol Relative to the Treaty, pp. 588-589; Procés-verbal. Exchange 
of ratifications, pp. 590-592; Detailed Regulations for the Execution of the 
Treaty concerning the formation of a General Postal Union, concluded at Berne, 
October 9, 1874, pp. 592-609. 


3 The text (Traité, Article III) reads comme mesure de transition. » 

™ Traité, Article III. The Réglement (XXIV) provided, moreover, that | 
countries which had not adopted the decimal metric system of weight might 
substitute half an ounce for fifteen grammes and two ounces for fifty 
grammes. : 

75 Traité, Article IV. ‘ 

76 Tyaité, Article X. . 

77 Traité, Article X. The text reads: 


L’Office expéditure paiera a l’Administration du territoire de transit 
une bonification de 2 francs par kilogramme pour les lettres et de 25 
centimes par kilogramme pour les envois spécifiés a l’art. 4 . 3 
Cette bonification peut étre portée a 4 francs pour les lettres et 4 50 cen- 
times pour les envois spécifiés a l’art. 4, lorsqu’ il s’agit d’un transit 
de plus de 750 kilometres sur le territoire d’une méme Administration. 


ae 


Rates for sea-transit were treated separately in the same article. 


7%8The Réglement (XVIII) provided that such period should be seven’ 
consecutive days beginning with the first of August and first of December, 
1875, respectively. The statistics thus obtained were to hold until June 30, 
1876. Subsequent periods were to begin June 1 and December 1, respec- 
tively. It was provided, however, that each office might demand a revision” 
first, in case of any important modification in the direction of corre- 
spondence and second, at the expiration of a year after the date of the last 
account. These requirements, however, did not apply to the Indian mail | 


[48 ] i 
: 


bn ee ee ee i ae oe 


435 


nor to the United States railroads between New York and San Francisco. 
These still formed the object of separate agreements between the Adminis- 
trations concerned. Tvraité, Article X. 


7 Article XII provided for the international exchange of post officemoney 
orders, and Article XIII, for the preparation of the Réglement. 


80 The text reads: * 


Il sera organisé, sous le nom de Bureau International de l’Union 
général des Postes, un office central qui fonctionnera sous la haute 
surveillance d’une Administration postale désignée par le Congrés, 
et dont les frais seront supportés par toutes les Administrations des 
Etats contractants. 

Ce bureau sera chargé de coordonner, de publier et de distribuer 
les renseignements de toute nature qui intéressant le service interna- 
tional des postes, d’émettre, 4 la demande des parties en cause, un avis 
sur les questions litigieuses, d’instruire les demandes de modification 
au réglement d’exécution, de notifier, les changements adoptés, de facil- 
iter les opérations de la comptabilité internationale, notamment 
dans les relations prévues a l’art. 10 ci-dessus et, en général, de 
procéder aux études et aux travaux dont il serait saisi dans 1l’intérét 
de |’Union postale. 


81 The text reads: 


En cas de dissentiment entre deux ou plusieurs membres de 1’Union 
relativement 4a l|’interprétation du présent traité, la question en litige 
devra étre réglée par jugement arbitral; a cet effet, chacune des 
Administrations en cause choisira un autre membre de |’Union qui 
ne soit pas intéressé dans |’affaire. 

La décision des arbitres sera donnée a la majorité absolue des voix. 

En case de partage des voix, lesarbitres choisiront, pour trancher le 
oo une autre Administration également désintéressée dans le 
itige. 


82 The text reads: 


Tout les trois ans au moins, un Congrés de plénipotentiaires des pays 
participant au traité sera réunien vu de perfectionner le systéme de 
l'Union, d’y introduire les améliorations jugées nécessaires et de 
discuter les affaires communes. 

Chaque pays a une voix. 

Chaque pays peut se faire représenter, soit par un ou par plusieurs 
délégués, soit par la délégation d’une autre pays. 

Toutefois il est entendu que le délégué ou les délégués d’un pays ne 
pourront étre chargés que de la représentation de deux pays, y compris 
celui qu’ils représentent. 

La prochain réunion aura lieu a Paris en 1877. 

Toutefois, l’époque de cette réunion sera avancée, si la demande 
en est faite par le tiers au moins des membres de 1’Union. 


83 The text reads: 


En foi de quoi les plénipotentiaires des Gouvernements des pays 
ci-dessus énumérés |’ont signé 4 Berne, le 9 October, 1874. _ 


[49 ] 


436 


84 A delay in the exchange of ratifications was prolonged by commo 
consent. The plenipotentiaries of the various governments concernet 
met at Berne, May 3, 1875. The representative of the French govern 
ment, Count d’Harcourt, announced that France adhered to the treaty 
subject to the approval of the National Assembly, with three reserva 
tions: (1) the convention might enter into force, so far as France was con 
cerned, as late as the first of January, 1876; (2) the compensation to b 
paid for territorial transit should be adjusted according to the actual rout 
traversed; (3) there should be no modification made in relation to th 
tariffs established in the treaty, except by the unanimous vote of th 
countries of the Union. After a modification of the second reservation a 
the suggestion of the Russian delegate, they obtained the assent of th 
other countries. The signature of France was then affixed to the treaty 
Procés-verbal. Exchange of ratifications. United States Statutes at Large 
XIX, 590, 


[50 ] 


437 


SUMMARY OF THE WORK OF THE UNIVERSAL POSTAL 
UNION SINCE 1874 


CONGRESSES AND CONFERENCES! 


In order that postal legislation may be brought into harmony with 
new interests and with the material progress of civilization, Inter- 
national Congresses—which have justly been called Postal Parlia- 
ments—meet every few years. The Congress of Madrid is the only 
one which, on account of the war, had to be postponed. It is planned 
to hold the next Congress in London in 1929. 
A Postal Congress is convened by the Government of the country 
in which the Congress is to meet. The following Committees are 
appointed: 


Ist Committee, to study the proposals concerning the Uni- 
versal Postal Convention. 


| 2d Committee, to study the proposals concerning insured 
articles and postal parcels. 


3d Committee, to study the proposals concerning money 
orders, collection orders, postal transfers, and subscriptions to 
newspapers and periodicals. 


At the last Congresses there has also been appointed a Commis- 
sion d’Etudes entrusted with arranging the wording of the Acts of 
mpe Union to be submitted to the deliberations of the Congress. 
There are also Sub-Committees for special questions, as for instance 
at Madrid to study the question of the monetary standard. 
When the work of the Committees is concluded the Congress meets 
in plenary sittings. These are presided over by the Postmaster- 
General of the country in which the Congress meets. The President 
is assisted by the Director of the International Bureau as Vice-Presi- 
dent and by the Chairman of the Committees. The Secretaries of 
the International Bureau form the secretariat of the Congress. The 
delegates to the Congress must be invested with powers enabling 
them to bind their Governments. A country may have ratified 
the Act of a Congress or not, but on the day fixed must be prepared 
| 1 Compiled from a report made on August 31, 1926, by M. Garbini, Director of the 


International Bureau of the Universal Postal Union, before a group of American pro- 
| fessors visiting Geneva as guests of the Carnegie Endowment. 


[5r J 


| 


438 


to execute it or withdraw from the Union. Even if a State has no 
ratified the Convention or one or other of the articles of the Régl 
ment, it is nevertheless considered as forming a part of the Union, and 
in reality it applies the decisions of the Congress concerning the 
said Convention or Réglement as if it had done so.? 

Extraordinary Congresses may be convened when a demand for 
such is made or approved by at least two-thirds of the contracting 
countries on agreement with the International Bureau. Conferences 
entrusted with purely administrative questions may be convened 
on the demand of at least two-thirds of the Contracting States. 
They are convened on agreement with the International Bureau. 

The Conference of Paris, 1863, and the Congress of Berne, 1874, 
have been described in detail in Mr. Sly’s article. Subsequent con- 
gresses and conferences have been held as follows: 

The Conference of Berne of 1876 gave more precision to the 
Confers fundamental prescriptions of the Congress of 1874 and 
of 1876 extended them to a larger number of countries.® 

In 1878, the Congress of Paris had reduced the sea transit rates, 
Coes of fixing them at 15 francs per kilo of letters and postcards 
of 1878 and 1 franc per kilo of other articles, (the Conference of 
Berne of 1876 had fixed them at 25 fr. and 1 fr. respectively); it 
fixed at 25 centimes the postage for single letters; it created the 
Arrangements for the exchange of money orders and insured articles; 
it laid the foundation of a Convention concerning postal parcels, 
a question which was referred to the International Bureau and 
Conterence which was decided at the Conference of Paris of 1880. 
of 1880 This Conference created the service of uninsured postal 
parcels not exceeding 3 kilogrammes. 


2The Union Countries have the right among themselves to maintain and conclude 
separate treaties and limited Unions with the object of lowering the rates or making im- 
provements in their services. The International Convention does not affect the legisla- 
tion of the individual countries as to what is not foreseen in the Acts. 

3 Requests of adhesion to the Postal Union must be made to the Government of the 
Swiss Confederation which transmits these requests to the contracting states of the Union. 
In 1876 India and the French Colonies entered the Union, followed in 1877 by Brazil, Japan, 
and Persia, and in 1878 by the Argentine Republic and Canada. The membership contin- 
Bee to increase until the only countries which do not now form part of the Union are as 

ollows: 


In Africa, Nigeria and Northern Rhodesia. 

In Asia, Afghanistan, Arabia, the Malay States of Johore and Trengganu, the Laccadive 
and Maladive Islands, the State of the Alaouites and Transjordania. 

In Oceania, The Tonga or Friendly Islands. 

Every contracting State is free to withdraw from the Union by notice given one year in 
advance by its Government to the Government of the Swiss Confederation. Up to the 
present time there have been but two withdrawals: The British Colony of Nigeria and the 
State of the Aiaouites. 


[52] 


439 


The Congress of Lisbon of 1885 created the express delivery serv- 


ice, authorized the transmission of gold and silver oa 
articles, precious stones, jewels, and other valuable of 1885 


articles through the post; it sanctioned the use of private postcards, 
created the Arrangements concerning international collection orders, 
introduced the service of cards of identity and the preparation of 
general statistics. 

The Conference of Brussels of 1890 drew up a plan Conference of 


. Bice eee Brussels of 
concerning subscriptions to newspapers and periodicals. 890 
Among the innovations introduced by the Congress of Vienna were, 
the obligation for all Union Countries to issue postcards Consies 
with reply paid and the permission to send unpaid post- of 1891 


cards on the same conditions as unpaid letters, and it adopted with- 
out any material alteration the plan of the Arrangement of the Con- 
ference of Brussels concerning newspaper subscriptions. It also 
decided on the publication of an alphabetic dictionary of all the 
post offices of the world to be kept up to date, and added to the 
duties of the International Bureau that of acting as clearing-house 
for the settlement of accounts of all description relative to the in- 
ternational service between the Administrations which claim its 
assistance. 

The Congress of Washington raised the maximum of trade charges 
on insured letters and boxes to 1000 francs and the ee ef 
weight of postal parcels to 5 kilogrammes; it lowered of 1897 
the transit rates and prepared the way for the reforms which were 
introduced by the Congress of Rome; it decided on the publication, 
in book form, of official information concerning the execution of 
the international postal treaties. 

It was the thorny and important question of transit which was 


the most debated at Rome. All the prescriptions re- Conerces 
lating thereto were altered and the transit rates again of 1906 


lowered. The weight of the single letter was raised to 20 gr. and the 
ate for every additional 20 gr. was reduced to 15 centimes. The 
ounce of 28 gr. was accepted as equivalent of 20 gr. 

_ A very interesting innovation was the reply-coupon. The need 
for a universal postage stamp has long been felt and the creation of 
one has been discussed at several Congresses. Up till now, how- 
ver, it has not been possible to overcome the difficulties in the way 


f its adoption; Mr. de Stephan, at the Congress of Berne, looked 
[53 J 


are manufactured under the superintendence of the Internatio 
Bureau and supplied at cost price to the Administrations whi 
sell them. The present price of the coupon is at least 40 centim 
or the equivalent in the currency of the country in which it is sold 
this prohibits speculation on the exchange—and it can be exchang 
in any country of the Union for a postage stamp or stamps repr 
senting the value of a single letter from the country of origin. 
must be exchanged within the six months following the month 


440 
upon it as the last ideal to be attained. The system of reply-cou 
decided upon was that presented by Great Britain. The coupon 


vs 


issue. 
These reply-coupons have done excellent service. If the Admini 
trations should consider it necessary, for the prevention of specul; 
tion, they may limit the number of coupons which shall be sold 
or exchanged by one and the same person in one day. So it is tha 
France has decided that only one coupon may be sold to the sa 
“person in one day; the number that may be exchanged in Fren 
post offices from other Union countries is however not limit 

In consideration of the vogue for illustrated postcards, the Com 
gress of Rome had to establish some uniformity in the very varied 
regulations which existed regarding them in the different Union 
countries: ( 

To satisfy a wish expressed by the First Hague Peace Conference 
(1899), it was decided that correspondence concerning prisoners of 
war should henceforth be post free. This favor extends to insur 
articles, money orders, and parcels (with the exception of those sen: 
cash on delivery). This measure was especially appreciated duri 
the war of 1914-1918. 

It was decided at the Congress of Rome that the next Congr 


oe should take place at Madrid at the end of 1912 or in t 
of 1920 course of 1913; it could, however, not be convened un 


September 1914. Then came the war and it was indefinitely post 
poned. After the armistice in 1918 the postal relations which h 
so long been dislocated or interrupted were gradually resumed. T. 
economic conditions of all the countries of the world having been 
entirely changed, the proposals which had been prepared in vie 
of a Congress in 1914 were no longer applicable. New proposals h: 
to be made and when the Congress met at Madrid in 1920 there w 
2248 to be discussed against 798 which had been presented to 


[54] 


441 


Congress of Rome. This Congress lasted 61 days during which 77 
sittings were held. That of Rome had lasted 50 days and had 49 
sittings. The ruling question was how to reestablish commercial 
relations dislocated by the monetary crisis. The sub-committee 
formed for the purpose examined the question from the following 
three points of view: 

1. In what currency should the transit rates in future be 
fixed? It was decided that the transit rates should be based 
on the gold franc. 

2. On what basis and in what way should the monetary 
standard be chosen? This gave rise to two proposals. One 
from Sweden, that it should be left to the creditor and debtor 
offices to arrange between themselves into what currency they 
would convert the gold franc. The second proposal, made 
by the French delegation, was on the same principle, but it 
admitted only one standard and took as basis of conversion 
the currency of the country which fulfilled the following three 
conditions: a. the highest rate of exchange; b. free circula- 
tion of gold; c. facility of exchanging banknotes for gold at 
sight. These three conditions being united in the United 
States of America, the French delegation proposed to fix the 
value of the gold franc at 10.000/51.825 of the value of the 
American dollar, with this reservation that in case of one of 
the three conditions being no longer fulfilled by the United 
States of America, the gold franc should be fixed according to 
the currency of any other country which fulfilled the three 
conditions and which should be indicated by the creditor office 
to the debtor office. The Belgian delegation proposed a com- 
promise between the two ideas, and the Sub-Committee adopted 
the French proposal with the reservation that the debtor and 
creditor offices could always agree between themselves to choose 
another standard. 

3. Shall the decisions taken by the Congress have only a 
future efficacy or can they be applied also to the accounts 
already settled or still to be settled? No resolution was taken; 
but the words ‘‘francs effectifs’’ in the Acts of Rome were 
interpreted as having the signification of “gold francs.” 


The Congress of Madrid had the delicate task of finding an elastic 
arifi for correspondence. It fixed a maximum and minimum between 
hich each country could vary its postage rates according to its own 
nancial needs, on condition that the equivalents be not higher than 
e rates fixed by the Convention (50 gold centimes for the single 
tter and 25 centimes for each subsequent postage) nor less than 
€ rates in force on October I, 1920, that is to say under the régime 

C55] 


442 ! 


of the Convention of Rome, namely 25 centimes for the single ed 
and 15 centimes for each subsequent postage. { 

No alteration was made in the transit question, but it was decide 
that the statistics relating thereto should be made every three i it 
stead of every six years. 

The Congress of Madrid made a new Arrangement concernin 
postal transfers. It also created the Commission d’Etudes. 

The Congress of Stockholm was marked by important decisior 
Conerrss iat of which however only the principal ones can be ind 
of 1924 § cated here. The Congress adopted as monetary un 
the gold franc of 100 centimes of a weight of 10/31 of a gramma an 
of a fineness of 0.900.. It reduced the international postage rate 
reducing that of letters to 25 centimes for the first weight of 2 
grammes and 15 centimes for every additional 20 grammes. Eac 
country is however at liberty to raise these rates 60 per cent or rf 
duce them 20 per cent. 

Certain transit rates were reduced by about half. 

Special regulations were made with regard to air services, of whic 
the following are the most important: The transit rates do not appl 
to air services; the Postal Administrations of the Countries serve 
directly by air services fix by agreement with the Companies cor 
cerned the rates for conveyance applicable to the mails loaded 2 
the air-ports in their respective territories for the services performe 
by the machines of these Companies. The Congress thus laid th 
basis for more extensive regulation of the air services on a subs¢ 
quent occasion. 

The Congress of Stockholm coincided with the fiftieth anniversar 
of the foundation of the Universal Postal Union which was brillianth 
celebrated at Stockholm. 

The Agenda will probably include among other subjects th 
following: ; 

Proposed London The standardizing and the reduction of postag 
Congress to be 
held in 1929 rates. 

Regulations for the air services. 

Acceptance of postal parcels in the air mails. 

Simplification of the work of the Congresses. 

Transit charges: territorial transit; sea transit. 

It is probable that in the not very distant future the Univers 


4See p. 51. 


[56 J 


443 


’ostal Union will be called upon to take up the question of post office 
avings banks and the universal postage stamp. 


INTERNATIONAL BUREAU 


The International Bureau is situated at Berne. It is placed under 
ne supervision of the Swiss Post Office but its organization is in 
ne hands of its Director. The staff consists of nine persons, a Direc- 
or, a Vice-Director, two Secretaries, an Assistant-Secretary, a 
egistrar, a Clerk, an assistant Clerk, and a Typist. This staff 
repares the work of the Congresses and Conferences. In the inter- 
al between the Congresses it deals with the requests for modifica- 
ion or interpretation of the provisions of the Acts of the Union. 
t makes examinations and investigations of common interest and 
irnishes the Administrations with any information they may re- 
uire. At the request of the parties concerned it gives an opinion 
pon questions in dispute. 

The International Bureau is not only entrusted with the printing 

nd distribution of the Acts of the Postal Congresses but also of va- 
ious other documents, dictionaries and digests of information re- 
uired by the Administrations, a list of which is contained in the 
Iniversal Postal Convention. It publishes an Annual Report in 
hich it gives account of its management and details of its work. 
his report gives at the same time an outline of the activity of the 
niversal Postal Union and the principal questions it has had to 
eal with during the course of the year. 
The International Bureau also publishes a monthly magazine 
titled the ‘‘Union Postale” in German, English, French, and 
anish, the first number of which was published on October 1, 
375. It contains in its most recent form technical articles con- 
‘ibuted by the various contracting states and articles on the in- 
nal organization of different countries. It gives information re- 
iting to jurisprudence postage rates, changes among the superior 
laff, and a list of the latest issues of postage stamps. 

H 


i 


[57] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for International Conciliation, No. 1, April, 1907 to No. 199, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
apalication to International Conciliation, 405 West 117th Street, New York 

ity. 

217. Peasant Conditions in Russia, 1925, by Jean Efremoff, Former Minister 
of Justice in the Provisional Government of Russia. 

February, 1926. 

218. te Tnsetbite of Pacific Relations, by J. Merle Davis, General Secretary. 
arch, 1926. 

219. The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 

April, 1926. 

220. Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 
berlain. 

May, 1926. A 

221. Treaty-Making Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 

June, 1926. ore 

222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 
Rappard, H. Wilson Harris and Raymond Leslie Buell. 

September, 1926. : 

223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 
in the Government of Italy. Recent Legislation in Italy. 

October, 1926. 

224. An Alternative Use of Force: When the Earth Trembled, by Richard 

J. Walsh; The Moral Equivalent of War, by William James. 
November, 1926. 

225. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 

Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 1926. f : r 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

January, 1927. d 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 

Recent Chinese Politics and Diplomacy. 
February, 1927. 

228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bruce, 
Prime Minister of Australia. 

March, 1927. 
229. Locarno and the Balkans: A Turning Point in History, by James T. 
psolwelly The Possibility of a Balkan Locarno, by David Mitrany. 
pril, 1927. 5 

230. The Interallied Debts. Statements as to the Desirability of an Early 

Revision of Existing Arrangements. 
May, 10927. 

231. The League of Nations: The League of Nations asan Historical Fact, 

by William E. Rappard; The Admission of Germany to the League of 
5 Nations and Its Probable Significance, by Caleb Perry Patterson. 
une, 1927. : ‘ 

232. The Permanent Court of International Justice: The United States and 
the Permanent Court of International Justice, by Quincy Wright; 
Sidelights on the Permanent Court of International Justice, by Ake 
Hammarskjold. 

September, 1927. ei 

233. The Genesis of the Universal Postal Union. A Study in the Beginnings 
of International Organization, by John F. Sly. 

October, 1927. 


at} 
Melua 


A 


Sm 


INTERNATIONAL CoNCILIATION 


Published monthly, except July and August, by the 
Carnegie Endowment for International Peace 
Entered as second-class matter September 15, 1924, at the post office at 
Worcester, Massachusetts, under the Act of March 3, 1879. 


ITALY’S FINANCIAL POLICY 
As Outlined By 


CouNnT GIUSEPPE VOLPI OF MISURATA, 
MINISTER OF FINANCE IN THE GOVERNMENT OF ITALY 


TEXT OF THE ITALIAN LABOR CHARTER 


NOVEMBER, 1927 


| No. 234 


CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
PUBLICATION OFFICE: 44 PORTLAND STREET, WORCESTER, MASS. 
EDITORIAL OFFICE: 405 WEST II17TH STREET, NEW YORK CITY 


Subscription price: 25 cents for one year, one dollar for five years 
Single copies 5 cents 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


ROBERT S. BROOKINGS 


Trustees 


NicHoLas Murray BUTLER 


Joun W. Davis 
FREDERIC A. DELANO 
Lawton B. Evans 
AUSTEN G. Fox 
ROBERT A. FRANKS 
CHARLES S. HAMLIN 
Howarp HEINZ 
Davip JAYNE HILL 
ALFRED HOLMAN 
Wiiiam M. Howarp 
RoBERT LANSING 


Officers 


FRANK O. LowDEN 
ANDREW J. MONTAGUE 
Dwicat W. Morrow 
RoBERT E. OLps 
EpwIn B. PARKER 
LeRoy PERCY 
WittraM A. PETERS 
Henry S. PRITCHETT 
Ex.rau Root 

JAMEs Brown Scotr 
James R. SHEFFIELD 
Maurice S. SHERMAN 
James T. SHOTWELL 


Smas H. StRAWN 


President, NICHOLAS MuRRAY BUTLER 
Vice-President, ROBERT LANSING 
Secretary, JAMES BRown Scotr 

Assistant Secretary, GEORGE A. FINCH « 
Treasurer, ANDREW J. MONTAGUE 
Assistant Treasurer, FREDERIC A. DELANO 


Executive Committee 


NicHotas Murray BuTLER, Chairman 
James Brown Scott, Secretary 


AusTEN G. Fox 


ANDREW J. MoNnTAGUE 


Henry S. PRITCHETT 


Exrau Root 


James T. SHOTWELL 


Division of Intercourse and Education 


Director, NICHOLAS MuRRAY BUTLER 


Division of International Law 


Director, JAMES BROWN SCOTT 


Division of Economics and History 


Director, JAMES T. SHOTWELL 


CARNEGIE ENDOWMENT FOR 
INTERNATIONAL PEACE 


DIVISION OF INTERCOURSE AND EDUCATION 
Director, NicHoLtas Murray BuTLER 


Assistant to the Director, HENRY S. HASKELL 

Division Assistant, AMY HEMINWAY JONES 
Office, 405 West 117th Street, New York City 
Telephone, Cathedral, 4560—Cable, Interpax, New York 


SPECIAL CORRESPONDENTS 


Sir WILLIAM J. CoLuins, M.P., London, England 

JEAN EFREMOFF, Paris, France. (Russia) 

F. W. ForrsSTER, Zurich, Switzerland. (Germany) 
HELLMUT VON GERLACH, Berlin, Germany 

EpDoARDO GIRETTI, Bricherasio, Piedmont, Italy 

CHRISTIAN L. LANGE, Geneva, Switzerland 

David MitTRANy, London, England. (Southeastern Europe) 
TsuNEJIRO MryAoKA, Tokyo, Japan 


Centre Européen 


Comité d’Administration 


Paut APPELL, France, Président HENRY LICHTENBERGER, France 


Moritz J. Bonn, Germany GILBERT Murray, Great Britain 

GUILLAUME Fartio, Switzerland ALFRED NERINCX, Belgiun 

ALFRED G. GARDINER, Great Nico.as S. Po.itis, Greece 
Britain E. voN PRITTWITZ UND GAFFRON, 

AnprE Honnorat, France Germany 

GerorGEs LECHARTIER, France JosEpH ReEp.icH, Austria 


Count Caro Srorza, Italy 


Directeur-Adjoint, EARLE B. BABCOCK 


|Secrétaire Générale, Mite. M. Tu. PEYLADE 
| Auditeur, Ta. RuyssEN 


Bureau, 173 Boulevard St.-Germain, Paris, France 
Téléphone, Fleurus 53.77—Adresse Télégraphique, Interpax, Paris 


CONTENTS 


TFACE . 


TLINE OF ITALY’s FINANCIAL POLIcy 


he Settlement of the War Debts . 

he National Budget 

Inification of Note Issues 

he Control of Expenditures 

adustrial Securities and the Stock Buchinged! 
unding of the Floating Debt 

ogical Developments 


ANCIAL STATEMENT BY MINISTER OF FINANCE 


e Need for Industrial Concentration 
: Trade Balance and the Balance of Payments 
xport Credits 
reign Loans 
Ben: Receipts and Beneritures yetare Sad since cts Ww ar 
hree Budgets: 1925-26, 1926-27, 1927-28 . 
he Financial Year 1925-26. The Use Made of fhe Sucoins 
e Financial Year 1926-27 aa 
nancial Year 1927-28. 
»cal Government Bodies 
ssa Depositi e Prestiti 
hxation Policy . 
ympensation of War vee 
e Cassa Ammortamento . 
he Bank of ee Banks—The Wee and Bechanes 
I ates : 
he Instituto di buitlasione 3 


ie National Debt 


I 


f OF THE ITALIAN LABOR CHARTER . 


PIOGRAPHY . 


rey oe 


447 


PREFACE 


Under the title “The Political Doctrine of Fascism’? there was 
iblished in the October, 1926, issue of International Conciliation an 
dress delivered by the Italian Minister of Justice which had been 
cepted by Premier Mussolini as an authoritative statement of the 
ilosophy of Fascism. The present document contains an equally 
thoritative statement of Italy’s financial policy prepared for the 
megie Endowment by the Italian Minister of Finance. It is 
ered to the readers of International Conciliation—together with 
2 full text of the speech made by the Minister of Finance on June 2, 
27—as a contribution towards an intelligent understanding of 
ent developments in Italy. 

The text of the Italian Labor Charter promulgated by the Italian 
vernment on April 21, 1927 is also included for the same purpose. 

A bibliography of books on Italy will be found on pages 56-61 of 
ternational Conciliation No. 223, “The Political Doctrine of Fas- 
m,” October, 1926. A list of the more recent books on Italy will 
found at the end of this document. 

: NicHoLaAs Murray BUTLER. 
Ww York, October 5, 1927. 


| 


ox: 


449 


ITALY’S FINANCIAL POLICY 
As Outlined By 


Count VoLri or MISURATA 


_ When I was called a little over two years ago, on July 13, 1925, 
0 direct the Ministry of Finance, I told the Italian and foreign jour- 
jalists who wanted to interview me as to my intentions and my pro- 
ram, that I wished to be mute, but not deaf. 

_ My long-experience-as a business man and politician has taught 
ne to prefer acts to words. Before acting as a negotiator for the 
Sovernment-of my country, my duties as president of financial and 
ndustrial companies had led me to enter into relations in the inter- 
jational field. I have thus had a long training from which I have 
rned that when one is engaged in constructive work, one never 
egrets not having spoken. 

| On one of my journeys in the East a rough inscription on a stone 
yas deciphered for me, which said, “‘He who vers us talk with a 
yayfarer makes no progress with his own journey.’”’ This simple 
axim, so simple that it appears almost trite, states a great truth. 
Vhen one has a goal to attain one is of course compelled to talk, but 
me should say only what is necessary, and above all things, ome~ 
hould avoid forecasts, which are always harmful, and too many 
lustrations, which are equally harmful, for they distract attention’ 
om the fundamental basis of facts. 

When I took over the Ministry of Finance, I knew what I had to 
9, but I also knew that success depends on adapting one’s ideas to 
xe needs of the case and to the development of events. 

There are no such things as miracles, either in politics or in finance. 
(either can one improvise or build up theories to which events must 
forcibly fitted. I firmly believe that when the foundations of a 
mcern, whether it be public or private, have been well laid, and 
hen the orderly progress of the work has been assured by providing 
é€ necessary safeguards, the attention of the director of the work 
ould be devoted to presiding over it and correcting any errors which 
‘ay arise, interfering as little as possible, and when he must inter- 


[9] 


450 


fere, doing so in such wise as to disturb as little as possible t 
diligent activities of the men engaged in the task. 

It has been said that notwithstanding my expressed intention 
have spoken. I have spoken as little as possible and listened 
much as possible. Assertions must be interpreted in accordat 
with the logic of the situation. A Minister who was literally dui 
would not be a Minister, and still less a Minister of Finance. J 
as a man who talked too much would fail in his duty as Minister 

The Carnegie Endowment for International Peace has asked 
to give a financial statement for publication in the United Stat 
Each year, when the Budget is before Parliament, the Minister 
Finance makes such a Financial Statement, in which he reports 

“the House on the situation and on the work accomplished. — 
June 2, 1927, I made a statement in the House of Deputies wh 
lasted nearly two hours, in which I believe I set forth as fully a 
accurately as possible the financial and economic situation of Ital 

I could summarize, for a wider public, what I then said. I pre 
to secure the same result by running through the chief speeche 
have made since taking office as Minister of Finance. This will sh 
that my speeches have been, as I wished them to be, sign-po 
marking the progress of events. 


THE SETTLEMENT OF THE WAR DEBTS 


My first speech in the House as Minister of Finance was delivel 
on December 5, 1925 to announce, as I did shortly afterwards) 
the Senate, the conclusion of the agreements between Italy a 
the United States for the settlement of the war debt, made in Was 
ington on November 14, 1925, and the Loan obtained from J.) 
Morgan and Company of New York on November 18, 1925. 

In February, 1926, I informed the Italian Parliament of the agn 
ment arrived at with Great Britain. : 

By these agreements I had met one of the essential needs of 4 
Italian Budget: the settlement of the foreign debt. 

It was an unknown quantity which weighed on our budget w 
the overwhelming figure of some 130,000 million lire at the rulf 
exchange rates of the day, while the actuarial value of the liabilif 
at the present rate of exchange, and taking into account the amoul 
already paid, has been reduced to less than 15,000 million lire, 
able over a period of 60 years from reparation receipts. 

1See p. 20. 
[10] 


451 


The American loan of 100 million dollars, equivalent to 500 mil- 
on gold lire, was obtained because, notwithstanding the favorable 
onditions of our monetary problem (the Italian exchange market, 
hen under the direct daily supervision of the Treasury, had settled 
own to relative stability) and of the problems connected there- 
ith—circulation, credit, and Treasury conditions—our gold re- 
erve was small and it was desirable to increase it. 

In accordance with the program adopted, the proceeds of the 
florgan loan were transferred by a decision, taken at my suggestion 
yy the Council of Ministers on August 31, 1926, from the Treasury 
o the Bank of Italy, thus reducing the note circulation issued on 
ehalf of the Treasury by 2,500 million lire. The ratio of the cir- 
ulation to the gold reserve at the present rate of exchange for ap- 
eciated valuta affords a cover of 54.47% apart from the large 
ums at the disposal of the Treasury through the Exchange Institute, 
ecured more especially by the purchase of appreciated valuta ob- 
ained by foreign loans made for constructive purposes by munici- 
yalities and private companies, and by direct purchase when favor- 
ible opportunities offered with the cash held by the Treasury itself. 


THE NATIONAL BUDGET 


| On March 28, 1926, I delivered a speech in Turin to commemorate 
he 7th anniversary of the founding of the Fasci. It was a political 
ee, but I was expected to speak on the financial situation 
nd I did so. I then recalled the serious condition in which the 
ascist Government took over national finance after the march 
Rome. The Budget deficit of over 15,000 million lire with which 
e financial year 1921-22 had closed had been described by the 
en then in power as an inevitable evil which might be reduced but 
t eliminated. The deficits on the State’s industrial enterprises 
hat on the railways amounted in that same year to 1,258 million 
e) seemed beyond remedy. The stormy fiscal policy then pur- 
ed had led to a dangerous exhaustion of revenue resources. The 
cal government bodies were on the way to bankruptcy. 
I was able to state at Turin that the deficit, which had been re- 
ced to 3,029 million lire at the close of the financial year 1922-23, 
ter eight months of the Fascist régime, and to 418 million lire on 
ne 30, 1924, had been converted into a surplus of 417 million lire on 
ne 30, 1925, as I had had the pleasure of announcing to Parlia- 


feed 


452 


ment. The railway deficit had been turned into a surplus of 3’ 
million lire at the close of the financial year 1925-26. I then d 
scribed how this had been achieved, through a strict, prudent, a 
constructive financial policy based on more careful assessments 
more equitable incidence of taxation, and a stricter control of ¢ 
penditures. The Head of the Government had said in one of k 
speeches to the House: “When finance is sound and solid and sa 
all is safe, but if finance collapses, the whole Nation will collapse 
The greatest care has been devoted to the financial and econom 
policies of the Italian Government. 

While measures were being taken to balance the Budget, a polit 
has been initiated for valorizing all our national resources, ag 
cultural, industrial, mining—from wheat to petroleum—so as © 
check the easy but costly habit of securing supplies of raw materié 
from abroad which our own territory could supply to our nation 
industries. Italian economic life is now called upon to make its ¥ 
most effort. The National Export Institute, and the General Ita 
Petroleum Corporation are organs for carrying out this econom 
policy of the Government. 


UNIFICATION OF NOTE ISSUES 


On April 18, 1926, I delivered a speech in Naples at the hea 
quarters of the Bank of Naples, where I had gone to convey my gre 
ings to Count Nicola Miraglia who, at 92 years of age, after long ye 
of loyal and valuable service to the Government, and after directi 
the Bank of Naples for many years, which had been reorganized 
him in a time of great difficulty, had asked permission to retire te 
well-earned rest. 

A few days previous, the Fascist Grand Council had approved t 
proposal made by me to centralize the note issue privilege in the Ba 
of Italy. ‘ 

This centralization had been under consideration for over thit 
years. The eminent Italian statesman, Francesco Crispi, had 
pressed himself in favor of it in 1893. But local patriotism wi 
then too strong in Italy to allow such a reform to be carried o} 
The unitarian spirit had to become a living national reality, vivifi 
by Fascism, before the change could be made, as it was made by t 
Decree Law of May 6, 1926. “Italy,” as I then stated in my Napl 
speech, ‘‘ with the organization of her great and complex commere 


[12] 


ae; 


453 
nterprises has completed the cycle of regional economy and she now 
quires that the Government which directs the life of the Nation, 
rovide her with a currency organ adequate to meet the needs of pro- 
action and exchange whose activities act and react throughout the 
hole of our national territory. Italy is now entering the arena of 
ternational finance, her credit is quoted on foreign markets, and 
ar actions show her firm determination to see her valuta judged on 
$ own merits as it should be, for ours is a country which respects 
| interests and wishes to see her own position as a producer re- 
ected in the international sphere.” 

“The stage now reached by the productive activities of the Nation 
mands the unified control of the monetary system, for it is essential 
at the credit policies of the country be likewise placed under uni- 
sd guidance and supervision.” 
As I have stated, the centralization of the note issue privilege in 
ie Bank of Italy was enacted by the Royal Decree of May 6, 1926, 
. 812, and by the Royal Decree of June 15, 1926, N. 1195, which 
nctioned the agreement of that date between the Italian Govern- 
ent and the Bank of Italy: the Royal Decree of November, 1926, 
-1192, sanctioning the agreement between the Italian Government, 
e Bank of Italy, the Bank of Naples, and the Bank of Sicily, signed 
June 26: the Royal Decree Law of July 23, 1926, N. 1298, con- 
ining the provisional arrangements concerning the reorganization 
fic Banks of Naples and Sicily in connection with the note issue. 
e transfer of the reserves, notes and credit functions from the Banks 
‘Nave and Sicily to the Bank of Italy was accomplished with the 
ost regularity. While the Bank of Italy is now the only Bank of 
ue, the Banks of Naples and Sicily will continue to exercise their 
ctions as powerful organs for the collection of savings and the 
stribution of credit in the interests of national as well as regional 
momic life. 


THE CONTROL OF EXPENDITURE 


June 3, 1926, I delivered a speech in the House of Deputies on 
expenditure of the Ministry of Finance during the financial year 
ich had just closed and on the estimates for the year 1926-27. 
faced my remarks by some general considerations on the prob- 
of expenditure. “I had the pleasure,’’ I stated, ‘‘of announcing 
you last year a surplus of 417 million lire: this surplus has now 


[13] 


454 : 


increased: on April 30, ult., it stood at 668 million as a 
to 562 million at the end of March, and as compared to a deficit 
some 226 million lire in April, 1925. This shows that I have ker 
my promise to protect and increase the budget surplus.” 

Then, pointing out that there had been some important increase 
in expenditure, I added: “I refuse to consider the problem of e 
penditure as a mere accountancy question apart from the productiy 
efficiency of the country. I consider that a policy of severe contré 
and selection is essential if the Budget surplus is to be oe 
but I cannot approve of a policy of mere renunciation which I shou 
look upon as extremely harmful.’”’ 

“Ttaly must be able to discriminate in the matter of expenditu 
while at the same time measuring expenditure by receipts, and avoid 
ing with inflexible severity all unessential outlays. Her technicé 
equipment was neglected during the war years, and in those whi 
immediately followed, and it must now be brought up to the pre 
ductive requirements of a great Nation.” 

After carefully examining the financial situation of the coun 
I concluded my speech by stating that Italian national finance 
sound and solid, and reflects the soundness and solidity of the Natior 

“Ttalian national finance,’’ I said, “‘is sound because it is aboy 
all things sincere: it is solid because the vigilant action of the Govern 
ment is paralleled by the well-regulated activities of the citizens, i 
whom the conviction is steadily growing that national wealth is 
result of the work and productive activities of the individual.” 

“Ttalian finance,’’ I went on to say, “‘is not plain sailing. Finane 
is not plain sailing in any great nation today, not even in the wealth 
iest. The great war destroyed probably 30% of the public and privat 
wealth of Italy: our resources are limited: we still need to draj 
large supplies from abroad: our population is increasing annual 
by some 400,000 persons. Between the two equations, ‘productid 
and labor,’ and ‘natural resources and capital,’ the discrepang 
which could be noted before the war still exists. Nevertheless Ital 
has secured financial results which enable her to face the futul 
with proud serenity.” ) 
of the need of obeying the injunction of self-sacrifice and strid 
frugality, as it had already obeyed promptly and fully the injunctio 
to serve the nation in the army, in the field, and in the workshop. 

In these remarks I foresaw the need of bringing Italian econom} 
life into harmony with present possibilities, an imperative need whid 


[14] 


fi 
by 
. 


455 


yecame categorical when, in due time, a policy of deflation and\» A, 
evalorization was adopted. 


— 


INDUSTRIAL SECURITIES AND THE STOCK EXCHANGES 


On June 17, 1926, I delivered a speech at the opening of the stock 
xchange at Bologna which offered me an opportunity to speak on 
he security market. 

“Italy,” I then said, “is the latest to join the comity of great 
fations and to take her place in the international economic arena. 
it the talents and productive capacity of Italian captains of 
idustry have created in a few years a great network of industries _ 
thich support one-fourth of our population.” 

“In 1900 we had 648 joint stock companies with a capital of some 
212 million lire: in 1908 the companies numbered 2,509 with 
pproximately 5,000 million lire of capital: in 1914 the number of 
smpanies had risen to 3,138 and the capital to nearly 6,000 million 
re: in 1921 there were 6,191 companies with over 20,350 million 

e of capital: in 1924 there were 9,078 companies with 28,420 
Sion lire of capital: in 1925 there were 10,737 companies with 
3,480 million lire of capital: and at the end of 1926 the number 
ood at 11,913 companies with 40,200 million lire.”” On June 30 
‘this year, the companies numbered 12,451 and the capital amounted 
41,100 million lire. 

The Government had to intervene to regulate the increase of 
pital in the case of companies with over 5 million lire, to prevent 
e too rapid growth of industrial activity from becoming a perturbing 
ctor in private and national economic life. Since then the growth 
been better regulated. 

I thought it necessary to introduce this measure not to check 
ustrial development, but to regulate it in the interest of all! 
mcerned. 

All phenomena, and especially those of finance, must be faced and 
ved in a spirit of equilibrium and order. Thus, when in August 
25 | became convinced that building activities were going forward 
th excessive and unorganized rapidity, evidenced by the fact that 
18 months in the years 1924-25 over 7,000 million lire had been 
‘ested in them, I had recourse to two kinds of measures, one of a 
msitory nature to eliminate the drawbacks consequent on a 
igestion in the building trades, the other of a permanent character 


[15] 


KK 


456 : 


for encouraging the building of houses of the description most need¢ 
to meet social requirements and the dictates of economy. | 
In my speech at Bologna I also spoke of the fluctuations on tl 
security market which are characteristic of stock exchanges tl 
world over, and I reminded my audience that while, in the autun 
of 1925, New York stock quotations had arisen to very high figure 
in March 1926, the opposite phenomenon had set in with a fall whic 
in three weeks represented a loss to American financiers of ov 
4,000 million dollars. It should be noted that this collapse coincide 
with events which should have favored and sustained high price 
such as the settlement of a long mining strike, and the enactment of 
fiscal reform which reduced considerably the tax charges on saving 
I then pointed out that the fluctuations on the Italian stot 
exchange should be taken into due consideration, but that the 
importance should not be exaggerated, as not more than ~ 
million lire worth of securities are listed on the Exchanges, while 
a matter of fact they actually handle a value of only some 5, 
million. Indeed, I then arranged to have the number of securi 
handled on the exchanges published daily together with the num 
of those existing, so that bearers should not be deceived as to t 
real value of such securities by the speculative prices obtained 
those handled on the Exchanges and subject to the caprice of spe 
ulation. The same holds good of Government securities, which ¢ 
sometimes subject in Italy, as elsewhere, to unjustified depreciatio 
regardless of their essential value and of the credit enjoyed by # 
Government. 
On the same occasion I stated that the General Accountant 
Office of the State had placed the surplus for the financial year 192} 
26 at 1,489 million lire: later returns altered that figure and rais 
it to 2,268 million lire, as I announced to the Senate on Decembe 3 
1926. | 
The General Accountant of the Treasury in handing me # 
figure, which is unprecedented in the history of Italy, said: “T. 
figure, which is the boast of the Fascist régime, overwhelms } 
criticism by its importance: I therefore refrain from analysis aj 
deductions. ”’ 


FUNDING OF THE FLOATING DEBT 


On the same occasion I spoke to the Senate of the funding of t 
floating debt and the issue of the Lictor’s Loan. 


[16 ] 


457 


The Central Office of the Senate concluded its deliberations by 
ctioning the decrees in question in the following terms: ‘‘The 
jancial operation in question is one of the most important and we 
ive no hesitation in saying, one of the most able which have been 
rried out in our country. It could only have been conceived and 
ought to a successful conclusion by a strong Government, sure of 
e consent, not only of both Houses of Parliament, but also of that 
public opinion. We propose that you give your unanimous ap- 
oval to the laws relating thereto.’”’ I then said that I accepted the 
ittering remarks of the Central Office not in the name of the Govern- 
ent, and still less in my own name, but in that of the Italian people 
hich knows how to face and solve the problems of its national life 
ith ability and serenity. 
The Treasury Bill is an instrument which should represent a 
fe means of procuring ready money for the Treasury, and should 
rm a small percentage of the national debt. It had degenerated in 
yst-war years. 
Prior to the funding operation, nearly 30% of the Italian national 
sbt consisted in these Bills. I compared the situation to that of a 
eat commercial enterprise which should have 30% of its invest- 
ents in the shape of short-dated notes to bearer. Bankruptcy 
uld be a latent and ever-present danger. 
Before we acted, France and Belgium in the face of a similar danger, 
had to act. As soon as a market tendency to present Treasury 
a for payment became apparent—such payments amounted to 
arly 2,000 million lire in three months—the Italian Government 
fi no hesitation in deciding to fund the floating debt. 
In my speech to the Senate I solemnly declared that the Govern- 
nt had broken none of its promises, as one must not destroy the 
irit of a promise by adhering to the letter. We had to protect the 
undness of Italian finance, the corner stone on which a sound cur- 
cy rests and by which it is judged. The State would have broken 
; engagement if it had gone on paying its creditors in a steadily 
preciating currency, with all its inherent evils. 
By funding the floating debt and converting it into a new security, 
pularly known as the Lictor’s Loan, the issue was opened to public 
bscription, and its function was defined by the late lamented Luigi 
zzatti as “organic and compensatory.”’ ‘‘The loan,’’ wrote 
zatti, ‘ensures beyond doubt a good rate of interest to the sub- 


fran 


458 


scribers for a fixed period of years and it saves Italian finance from 
the fatal dilemma of either inflating its currency, or steadily re 
stricting discounts and all forms of credit.” 

The subscription to the Lictor’s Loan was received with favor by 
the public as is shown by the results secured: three million persons 
subscribed amounts exceeding 3,000 million lire. Italian emigrants 
residing abroad participated in the subscription to the extent of ovel 
200 million lire. 4 

Thus the Fascist Government has radically settled the question oj 
the floating debt, which now barely amounts to 66.6% of the tota 
debt and consists exclusively of outstanding Bank and Treasu 
notes. At the same time the National Debt itself has been reduced 
by over 4,000 million lire. At my suggestion the Council of Ministers 
is about to establish a Sinking Fund for the further and gradual re 
duction of the National Debt. On June 30, 1923, this debt amounte 
to 95,544 million lire: on May 31, 1927, it stood at 90,751 million. 


LOGICAL DEVELOPMENTS 


I think that the above facts justified me in stating in the Hous 
of Deputies on June 2, 1927: ‘‘Since the advent of the Fascist Govern 
ment, financial policy has followed strictly logical lines laid down b 
the Leader of Fascism and Head of the Government. The executioi 
of this plan during the last two years has been entrusted to mé 
Others might have discharged the duty with greater ability, bu 
none certainly with greater confidence or solidarity of purpose witl 
our Chief. My confidence is based on reasoned optimism resulting 
from an intimate knowledge of all the factors involved.” 

In the same speech I stated that it was the intention of the Govern 
ment to maintain the lira exchange on gold at the present rate unti 
the whole cycle of manufacturing and agricultural production, trad 
and credit relations have been leveled up to it, and until they have 
had sufficient time to adjust themselves to the new parities. Sub 
sequently the communication sent out by the Head of the Govern 
ment in consultation with the Minister of Finance, has fixed the rate 
of lira exchange for an indefinite period around 90 to the pouné 
sterling. ; 

This entails a revision of all the factors in Italian economic life, 
which I foresaw would be necessary as far back as my speech delivered 
at the end of March, 1926, in Turin. I then reminded Italian pro 


[18 ] 


459 


ucers of the need of adjusting themselves to the general needs of 
je economic situation and of the valuta: and again in October of 
lat year, speaking to the merchants of Genoa, I said that the path 
‘aced by the Prime Minister at Pesaro is the only one which can 
oth rehabilitate the currency and the economic life of the nation, 


‘evitably be forced out of business by a policy of deflation and_ 
valorization. 
“Let each of us measure,” I then said, and I repeated the words in 
y last speech to the House, “‘his activities, however bold, by the 
eans at his disposal. Only thus will the Fascist Government be 
le to meet the real needs of those who produce and create authentic 
w wealth for the country.” 
“Sound industries and productive activities will survive the in- 
itable adjustment crisis, even though suffering for a period, which 
1 undoubtedly be short, heavy reductions of profits: but when the 
ssary price discrepancies cease, and when the necessary time is 
en to make the adjustment, then export trade both of manufac- 
ed goods and farm products will recover its vigor.” 
The general tendency of the speeches I have delivered since taking 
fice as Minister of Finance, and which I have here tried to outline, 
ads, it seems to me, to one conclusion: that the financial measures 
ken by the Italian Government have been systematic, tenacious, 
tl progressive. They represent one of the aspects of the life which~ 
e Italian people intend to live, a life of activity and struggle, of 
aseless, steady progress. 
I take pleasure in reminding my American friends of this, for I 
1ow that they follow the progress of Italian finance with under- 
nding sympathy. They have always appreciated our sincerity 
id the honest clearness of our language. 
The friendship between these two Nations of workers is one based 
mutual esteem and it will grow ever stronger. 


. 
[19] 


ad I urged the elimination of economic superstructures which would —” 


460 


Wet? 2? oe wah 4 Eee 


FINANCIAL STATEMENT?! 
By 
Count VoLri oF MISURATA 


Honorable Members of the House, 


I think the House will be at one with me in considering that th 
Minister of Finance has a difficult duty to discharge in speaking o 
the general interests of the Country, even though it be from th 
financial standpoint only, while this hall is still echoing with th 
great speech delivered here by the Prime Minister, who in speakin 
of the monetary problem, the predominating feature of: publi 
finance, made such incisive and conclusive statements. 

But I believe that apart from the financial statement which th 
Minister of Finance is required to make, the Nation is entitled 
indeed I would rather say that it now feels it a duty to acquain 
itself with all phases of the administration of the public purse 
and that it is ready to listen to admonitions from the Governmen 
on this complex subject. 

The financial year which opened in July 1926 has undoubted! 
been an exceptional one in Italy, nor do I think that the ves whi 
is approaching will differ from it essentially. 

Both years mark certain phases in the Nation’s noble effon 
phases of the reorganization on which the whole people is tena 
ciously engaged, phases in the toilsome ascent initiated by the Fascis 
Revolution in the field of finance no less than in that of politic 
for after all finance is but one aspect, and one of the most signif 
cant, of the policy of a Nation. 4 

The periods we are considering are comprised within the cyel 
of events connected with the world post-war economic settlement 
events differing in their outward aspect from place to place but sub 
stantially similar, while the forward movement toward a definit 
goal is, we have no hesitation in saying, more rapid in Italy tha 


elsewhere. 
1 Made in the Chamber of Deputies, June 2, 1927. Reprinted from Provveditorato Ge 
erale dello Stato, Libreria, Rome, 1927—Year V. 


[ 20 ] 


461 


I must crave your kind attention in following this statement of 
neasures taken, achievements, work in hand, and work still to be 
erformed. I make no claim to submit new or startling programs; 
hey are not in keeping with the Fascist style which looks to concrete 
esults. I shall limit myself to clear and precise statements which 
vill connect up the past with the immediate future. 


Since the Fascist Government came into office financial policy 
ias followed the strictly logical lines laid down by the Founder of 
fascism, the Prime Minister. For the past two years the task 
f carrying out this policy has been entrusted to me; others might 
ave discharged this duty more ably, but none could have done 
© with greater faith or closer solidarity of purpose with our Chief, 
nd confidence based on reasoned optimism founded on a knowl- 
dge of all the factors involved. 

The Fascist Government had to balance the National Budget, 
wollen and shaken by our holy and victorious war, and yet more 
everely injured during a post-war period which history has now 
udged and condemned. Taxation had to be reorganized and sim- 
lified, the country had to be delivered from the burden and more 
specially from the menace of the foreign war debts, the problems 
rising from the national debt and the currency had to be brought 
ito line and regulated, it was necessary to prepare in due time, 

d realize as fast as possible, a settlement of a situation which 
ras and is inevitably artificial for all the peoples who participated 
1 or were closely affected by the war, and every effort had to be 
rade to attain a new equilibrium with the least possible hardship. 
_ All this has been or is being done, and I can boast of having carried 

t a notable part of this program. 

i 

'For us as for our Continental Allies the monetary problem has 
the preponderating one during 1926, and it has affected all 
e other problems. 

From the Ist of September 1925 the relation of our money to gold 
ad settled down within limits which, while inferior to its intrinsic 
ue, yet secured it a fairly satisfactory status on international 
kets. But in May of last year a wave of speculation, originating 
| the great British strike, seemed bent on upsetting all the internal 
external economic relations of the continental currencies of the 


C21] 


462 


as others. 
International speculation of this pernicious kind is a sad product 

mainly European—of the post-war period. In pre-war days it wa 

practically unknown. 


gang of powerful thugs, lying in ambush wherever symptoms po ‘ 
to an important monetary movement. Their first target was 
German mark; one after another the Austrian, Polish, and Rumania 
currencies followed suit, then came the turn of the French fran 
the Belgian franc, the lira, and yet others. It is not a question « 
“bulling” or “bearing’’ the market; their game is to provoke 


profit out of the savings and the labor of a whole people. It is 
“Black Hand”. little known to the general public, identified by th 
leading Treasuries, unworthy and contemptible. . 

It can be safely said that this rank weed does not flourish 
Italian soil; moreover the measures I took in August 1925 checke 
all inclination to cultivate it. I shall describe further on the stej 
taken by the Treasury to protect itself against such internatio 
speculation. 

Of course care must be taken not to confuse this miserable, pa 
logical phenomenon with legitimate trade in foreign valuta, even i 
a speculative nature, when by speculation we mean its purchase’ 
sale in view of real future needs, either on the money market or 
trade. ; 

The speculative movements on the money market to which I h 
referred took place during the short summer months of last y 
long and trying months to those in positions of responsibility 
had to keep close watch during that anxious time, seeking 
partial success to check by all technical means at their disposal d 
““bear’’ movement which would have led inevitably to endless 
rency inflation, involving the dread danger of seeing the value of 
lira reduced to vanishing point. J shall deal more fully further 
with exchange rates and the currency. 

This is not the first occasion on which I have expressed my s 
belief in the efficacy of the technical means at the disposal of 


[22] 


463 


Minister of Finance in facing such a situation as I have just described. 

[f proof were needed of the reasonableness of my doubt it has been 

afforded by the Pesaro speech. In that speech no reference was made 

to the technical aspects of the case, but it contained a profoundly 
moral and politically wise declaration of indomitable determination, 
which made international speculators realize that they were up against 

the strenuous opposition of a whole Nation, speaking through a 

Man of inflexible will who has taught the world to know that his 

words are but the prelude to decisive and immediate action. 

: The Head of the Government has said all there is to say about the 

Pesaro speech. Subsequently the lira, released from international 

speculation which in 1926 had grown to unprecedented proportions, 

turned naturally and without Treasury intervention to the level 
it which it had stood for many months. A continuous progressive 
mprovement set in, justified by the general economic and political 
sonditions of the country and by the steady and marked deflation 

f credit and currency which has been tenaciously pursued ever 

ince. 

This revaluation process has been accelerated during the early 
nonths of this year not only in the case of the lira but also in that 
f other European currencies, among which the Spanish peseta and 
he Rumanian lei. As was to be expected the appreciation of the 
ira in terms of gold has not been paralleled during this latter period 
f accelerated progress by the fall in the cost of living, nor has it yet 
een brought into harmony with many of the complex economic 
elations of our national life. 

_ But there is a great difference between the loyal recognition of this 
ct and the exaggerated fears to which some people have given way. 
o one can honestly deny the general advantages of revaluation, nor 

ilence the legitimate satisfaction with which the event is greeted 

y the vast majority of Italians, proud of having achieved such 
sults, even though well aware of the consequent difficulties affect- 
g individual and collective interests deserving of the utmost 
nsideration. 

We must not forget that our country is essentially an importer 
f staple goods for the requirements of its industrial and national 
fe. Every effort must be made to produce at home and to replace 
y home products the major part of these foreign purchases. The 

inister of National Economy is constantly urging the need of 


pea 


464 


utilizing to the utmost our productive capacity and of bringing th 
technical equipment of our agriculture and our industries up to 
level with the requirements of world competition. But all this take 
time. Meanwhile we cannot impoverish the country by allowir 
our products to be sold abroad at low prices in exchange for over 
priced foreign goods, thus establishing an artificial discrepane 
between our foreign payments and receipts. The economic interest 
of Italy demand that the purchasing power of our money on foreigi 
markets be increased in so far as is compatible with the equilibriur 
of our internal economic system. To this end we now wish the ra 
of the lira to gold to remain at its present level until the cycles ¢ 
manufacturing and agricultural production, and trade and credi 
relations have had time to adjust themselves to the new situation 
The problem will be re-examined in the autumn. Meantime the ge 
eral interest in the active efforts now being made to reduce the pric 
of the more important items in the cost of living gives promise ¢ 
success. 
As far back as March of last year, when commemorating at Turi 
the VI anniversary of the Fasci, I reminded Italian producers ¢ 
the need of bringing their activities into line with the needs of ou 
general economic situation and of the valuta. In the followin 
October at Genoa I said, and I now repeat, that the path laid dows 
by the Prime Minister at Pesaro is the only one which will lead to th 
rehabilitation of the currency and to national economic recover 
and I urged the elimination of those unsound business venture 
which are inevitably reduced to inactivity by a policy of deflatio 
and revaluation. 
' “ ~ Let each of us—I then said and I now repeat—measure his actiy 
\ ities by the means he possesses for carrying them out. Only the 
will the Fascist Government be able to assist the real needs of thos 
‘who produce and create genuine new wealth. 
Sound industries and productive activities will survive the ine 
itable crisis of adjustment, while submitting for a time, which 
certainly be brief, to a considerable reduction of profits. But whe 
the temporary price discrepancies have ceased and when the tim 
needed for this readjustment is given—and the Government hopt 
to give it—export trade both in manufactured goods and agriculture 
products will certainly revive. 
We must pause on the road to monetary rehabilitation until < 


[24] 


465 


men of good faith and good will have come up with us, and we shall 
then consider whether we can go a stage further. It will not much 
matter—it may even be for the best—if super-structures of the war 
and inflation period go under in the process. 


THE NEED FOR INDUSTRIAL CONCENTRATION 


With the above ends in view the Government, as the Minister of 
National Economy has already stated, is convinced of the importance 
of greater industrial concentration, which on the one hand reduces 
production costs and on the other, by strengthening the financial 
status of the concerns, lowers the often excessive cost of money. 
: he cost of money is another problem which the Government is 
studying and means to watch. With reference to industrial con- 
sentration I can state that measures are being studied to lighten 
nd in some cases entirely relieve industrial amalgamations from the 
aeavy fiscal charges to which they are now subject. 

: The Ministry of Finance will not for the present forego the control 
t is exercising over the capital increases of joint stock companies. 
The results of this control have been excellent and it has not hampered 
und enterprise. It affords a guarantee to holders of such stock, 
who cannot always be adequately guided by the security market 
quotations which are often subject to purely speculative influences 
and fail to reflect the real situation of the concerns. 
I am no believer in useless and vexatious controls, indeed I detest 
them. But there are limits which must be respected, and when they 
ire exceded it is the duty of the Government to interfere. 
I have on a previous occasion already expressed my respect for 
he holders of industrial securities. They represent over 40,000 
illion lire of capital, of which only a small part is in the hands of 
fpeculators and bankers. The publication of the number of securities 


putstanding securities. Italians have confidence in the development 
of their national production under the guidance of a strong and reso- 
ute Government which assures social peace. With the growth of 
mternational trade it has a sure future before it. 


[25 J 


466 


THE TRADE BALANCE AND THE BALANCE OF PAYMENTS 


The foreign trade movement in 1925-26, amounting to 40, 
million lire, reacts to such an extent on the valuta that I must needs 
refer to it here. 

You are acquainted with the many and contradictory theories 
held by experts and set forth by the Universities and the press as 
to the influence of foreign trade on monetary revaluation. It i 
unnecessary for me to refer here to opinions more or less scientifically 
sound or to take sides for one or other theory. I shall limit myself 
to facts based on the undoubted needs of the Nation. ‘ 

We have absolute need of cotton, wool, coal, lumber, wheat, 
heavy oils, copper, petroleum, ‘petrol, etc., etc. We are eagerly 
seeking for substitute products or new technical processes which 
will reduce our need of these goods, but such changes can only be 
brought about gradually. Meantime we must offset our need for 
these goods by exporting the output of our farms and factories 
as we best may, sparing no effort to improve our crops and the 
organization of our agricultural production, and to perfect our 
technical equipment within the limit of our means. Much remains 
to be done and we must do it, but much has been achieved of which 
we may well be proud, and we should bear this in mind when con- 
sidering the tasks still before us. . 

919,000 hectares of land have been reclaimed in Italy of recen 
years, which are a source of wealth and increase our output, more 
especially of cereals. A further 770,000 hectares are now being 
reclaimed in different parts of the Peninsula, from the fertile valley 
of the Po, where such important irrigation and drainage works have 
been done in the past, to the Pontine Marshes which for 2,000 years 
have baffled all efforts at reclamation; from the drainage works at 
St. Euphemia to those now being studied for the reclamation of the 
wonderful plain of Sibari on the Ionian Sea, to that of the Piang 
di Catania and Terranova in Sicily and of the two Campidani in 
Sardinia. All these efforts will in due time be assisted by the Govern= 
ment and the Treasury. | 

The Apulian aqueduct, a truly Roman work begun in 1904, pushed 
forward in Fascist style by my Colleague of the Ministry of Public 
Works, has so far cost 460 million lire, of which 200 million have been 
spent since the advent of the Fascist Government. 


[26 ] 


} 467 


er The water supply existing in the high mountains is being stored 
in hundreds of artificial lakes; the water power of our rivers is being 
harnessed to our industries, effecting a great saving in our coal 
requirements. 

_ Approximately 1,500 million lire have been spent during the past 
four years in improving our ports, and Genoa now holds the first 
place in Mediterranean trade. 

| The three great quays of that one port, the Adriatic Sea—Trieste, 
Venice, and Fiume—share the trade of its hinterland. 

At Naples, Palermo, Catania, Leghorn, Bari, the Fascist Govern- 
ment j is improving the harbor equipment and the development of 
these ports will be greatly assisted by extending to them all the 
privileges of free ports in accordance with the wish of the Head 
of the Government. 

Our post-war industry has shown an admirable power of expansion 
am many fields. The joint-stock company, while not without some 
drawbacks, nevertheless allows of developments unattainable by 
andividual means. At the beginning of 1922 there were 6,075 such 
companies in Italy with a capital of some 20,000 million lire; at the 
end of April 1927 the number had risen to 12,306 with a capital of 
some 46,000 million. 

When all allowances are made for the influence of inflation on this 
growth the importance of the effort it represents is none the less 
considerable. 

New markets and new grades of goods have been developed. I 
mention some of the more significant. 

During the calendar year 1921 we exported 10,505 automobiles 
valued at 288 million lire; during 1926 the number exceeded 34,000 
valued at 700 million lire. 

During the first ten months of the business year 1921-22 (July- 


e worth of woolen goods, 827 million lire worth of cotton goods, 
1,247 lire worth of silk; a total of lire 2,238 million. 3 
_ The figures for the corresponding ten months of the current finan- 
al year are 551 million lire of artificial silk, 400 million lire of woolen 
zoods, 1,615 million lire of cotton goods, 1,885, million lire of silk; 
i total of 4,451 million lire, or double the previous figure. 

_ The shipping trades and industries have developed to an unfore- 
een extent. 


April) we exported 68 million lire worth of artificial silk, 96 million) 


whe 


& 


468 


We hold the second place in world ship-building and the firs 
place in the building of motor ships which now occupy so important 
a place in shipping. 

Our merchant marine in 1914 consisted of approximately o 
and a half million tons of mediocre ships; it lost 800,000 tons during 
the war, or nearly 60% of its tonnage, the highest percentage of 
loss registered by any of the belligerent countries. Our merchant 
fleet now consists of 3 million tons of shipping including many o! 
the finest ships on the ocean and the receipts from freights are now 
one of the most important items on the asset side of our balance o 
international payments. 


During the first four months of this year Italy imported good 
valued at over 8,000 million lire and exported over 5,200 millior 
lire. During the corresponding months of the previous year, whe 
exchange rates were fairly stable, imports amounted to over 9,006 
million and exports to 5,400 million lire; we have thus reduced i 
ports by nearly 1,000 million lire. 

These figures must be considered in relation to the purchasing 
power of the lire. While the weight of our imports has increase 
by nearly 800,0c0 tons, the larger quantity has cost us a smalle 
number of lire. 

The Fascist Government watches foreign trade figures with closé 
attention. The Central Institute of Statistics established by th 
will of the ‘‘Duce,’’ has recently completed a series of calculation 
for rendering the statistics of our imports and exports over a serie 
of years comparable in relation to the monetary factor. These in 
quiries show that the gold deficit of our foreign trade has been steadili 
falling since the war, and that during the last four years it differ 
but little from the pre-war figure. 

If we take into account the reduced purchasing power of gol 
and the increase in our population amounting to some 6 millior 
we may well be proud of our economic growth which justifies th 
best hopes for the future, more especially when we consider th 
admirable adaptability of our people. 

Our trade balance this year, though it shows an improvement 
is undoubtedly an adverse one, but the nation can count on othe 
receipts for services to rectify the trade deficit. 

As I have stated, receipts in appreciated currency for our shippin 


[28 ] 


469 


services, which formerly amounted to an insignificant figure, will 
exceed during the present business year 1,000 million lire. Taking 
exchange rates into due account we believe that remittances from 
[talians abroad will not fall below those for the previous year, while 
we note that our compatriots in the United States are investing their 
savings largely in the Italian stock issued on that market. 

While the countries of origin and seasonal incidence of the tourist 
trade are changing, I believe it will maintain the level of previous 
years. 

I consider these three items with a few minor ones will balance 
the budget of foreign payments for the current business year, even 
when we take into account the service of the foreign loans, which 
have matured only in part, and the instalments payable on our 
interallied debts. 

The receipts from foreign loans have, for the most part, created 
credits in Italy’s favor as a notable part of these receipts has been 
invested abroad. 


: EXPORT CREDITS 
| 


The National Export Institute, thanks to measures which have 
eceived the support of the Treasury, including the cautious guar- 
ante granted to certain commercial credits held abroad, is already 
ffording notable help to the exporting classes. It is now devoting 
ls attention more especially to farm products which are in need of 
reater credit facilities and of more watchful technical assistance. 
Besides the aforesaid guarantee of special export credits held 
| broad, a guarantee already given on an extensive scale by the Goy- 
sarnments of Great Britain and Germany, the Ministry of Finance 
eans to facilitate the rediscount of exporters’ bills, expressed in 
ppreciated foreign currencies, through the agency of the National 
Exchange Institute, and to facilitate the insurance of commercial 
edits. 


FOREIGN LOANS 


During the period under consideration the financial situation in 
taly has been relieved by the receipt of large sums procured by 
oreign loans on which the Government wishes to speak clearly 
nd decisively. 

‘We all agree that if it were possible to do altogether without 
Oans, more especially without foreign loans, it would be better; 


[29 ] 


470 


but how is this possible without checking activities on which the 
nation’s life depends, when it is beyond the power of any one 
multiply suddenly our national savings, and when the deceptive 
device of resorting to the printing press is held in detestation? We 
must all admit that available reserves of appreciated valuta now 
afford the only protection against the attacks made by speculation 
on the productive and investing activities of the Country. This 
need is admitted by all, and the question then reduces itself to one ol 
borrowing wisely, cautiously, and within reasonable limits. 

For these reasons the Minister of Finance has resolutely refuse¢ 
to authorize loans not made for productive purposes which by 
creating new wealth are able to meet the cost of interest and amortiza: 
tion. A broad interpretation has been given to the definition “pro 
ductive’’ purposes only in the case of two municipalities, that o 
Rome, which will expend the amounts received almost exclusively 
on productive public works such as aqueducts, means of communi 
cation, etc., etc. and that of Milan, a great industrial centre full} 
able to meet the liabilities it has incurred out of its capital anc 
industrial assets. 

’” With these exceptions the Government intends, as I stated tc 
re ," Parliament shortly after my return from America, not to alloy 
~° }*municipalities to make loans abroad, except for short cash loans 

+, such as that made to Genoa for the period of one year. The Credii 

“Consortium for Public Works and similar bodies, by drawing o1 

national or foreign savings, and by granting loans with the greates' 
caution and only for clearly productive purposes will be able t 
provide for the normal needs of public bodies. The Head of th 
Government has already warned the administrators of local govern 
ment bodies and more especially the Podestas to limit expenditur 
to strictly necessary amounts for a period of time. 

Much has been accomplished during these years of the Fascis: 
régime; we shall have to mark time during this difficult period o 
monetary rehabilitation; then we shall start again. It is necessary 
however to give up once and for all the policy of municipalizatiot 
of services, which is alien to the Fascist program and is reminiscen 
of other times. It distracts the attention of the municipalitie 
from their legitimate field of action and creates, more especially it 
the larger centres, alarming financial problems, disproportionate t 
the aims which the administrators had in view. 


[ 30 ] 


\ 
} 
: 471 


It is well to point out that all the gold valuta secured by foreign 
loans flows into the National Exchange Institute of the Bank of 
Italy, and provides, as I have said, a solid protection, now a very 
considerable one, to our currency. This is apart from the increased 
reserves of the Bank of Italy to which I shall refer further on. 

On the other hand, the note issue has not been affected at all, as 
all these transactions have been carried out so far by the clearing of 
mternal debts, greatly to the improvement of our credit situation. 
Sufficient attention has perhaps not been given to the extent to which 


these foreign loans have contributed to ensure greater mobility to. 


yur banks and more especially to the Bank of Italy, a matter, this, © 
which affects the value of the national currency. 
_ I will reply more in detail to the Honorable Member, Sig. Sansoni, 
who is properly anxious to judge of the productive character of the 
= loans so far authorized. This will enable the Chamber to 
nderstand fully the history of a group of these transactions and 
heir technical consequences. I refer to the loans made to the 
ydro-electric concerns, so essential to Italian industry, and I use 
lata supplied me by the respective Associations. 
 Italy’s great electrical concerns had at the end of 1925 a program 
of work which required an outlay of 4 to 5 thousand million lire over 
1 period of five to six years, at the rate of.some hundred million 
te a month. 

How could the Banks meet such requirements in a period of 
eflation? 


e work which would have meant sooner or later an increase in|” 
ur coal purchases abroad. : 
To come to facts, the electrical industry has obtained since 
November 1925, over a period of some eighteen months, foreign 
ans for some 85 million dollars, many of which have not yet been 
onverted into lire and therefore have not yet been spent. 

The sums expended during the period referred to can be estimated 
ording to the most reliable valuations at an amount almost 
quivalent to the whole lira value of the loans made and not yet fully 
igned. These expenditures have all been made for the creation 
new wealth: thermal and hydro-electric power stations, canals 
d dams, electric lines and transformation stations, distributing’ 
stems, etc. 


Egrel 


The alternative was clear: foreign loans or the suspension ‘of’ ~”’ 


472 | 


. 


These new plants and constructions can generate a further thou 
sand million kw. of hydro-electric power each year. If this wall 
volume of power were generated by heat we should have to import 
annually even with the most up-to-date thermal power stations, 
perhaps, as much as a million tons of coal, at a cost equivalent 
to 150 million lire. : 

A sum smaller than this covers the service of interest and amortiza- 
tion on the foreign loans corresponding to the expenditure made. 
Thus, in a period of twenty-five years, the Country will have fully 
paid for plants which can generate indefinitely power equivalent te 
that obtainable from one million tons of coal a year. 

This notwithstanding, the Government certainly does not inten¢ 
to prolong indefinitely this loan policy; indeed it believes that the 
major need has already been or is being covered. We have so fal 
obtained abroad, inclusive of the two loans to the cities of Rome anc 
Milan, but exclusive of the Government loan of 1925, a sum of ap 
proximately two hundred million dollars. This figure cannot be con 
sidered disproportionate to the expansion of our national activities 

The ease with which Italian loans are placed abroad affords un 
deniable evidence of the consideration in which the Fascist régim 
and our political stability is held. The more important loans havi 
all been placed on the foreign markets by American or British bank 
which are among the most important in the world, thus confirmin; 
the prestige enjoyed by the Italian Treasury, a prestige which hai 
never failed it since the days of Cavour. 

The Government loans of one hundred million dollars which — 
_ obtained immediately after the Washington settlement, was placet 
by the Morgan Bank with that special care for which I gave it du 
recognition when referring to the matter in the House shortly afte 
its conclusion; the loan to the City of Rome was put through mainly 
by the National City Bank, that to the City of Milan by the Dillot 
Read Bank, all these operations being carried out, as is the custom 
of the American market, with the collaboration of the other grea 
banks of the country. The loan obtained by the Credit Consortiun 
for Public Works on behalf of the Italian State-subsidized shipping 
companies was issued simultaneously, as you will remember, of 
the New York and London markets, in America by the Morgar 
Bank with the assistance of the First National Bank and the Nationa! 
City Bank, in England by some of the largest London banks, Ham. 


[32] 


473 


Bros., correspondents of the Italian Treasury since 1887, the 
othschild Bank, correspondent of the Treasury since 1861, Morgan 
srenfell, and others. 


ET RECEIPTS AND EXPENDITURE BEFORE AND SINCE THE WAR 


fin all countries since the war there is a tendency for the Govern- 
ment to undertake ever new and more important tasks, more es- 
pecially in connection with services which respond to economic, 
intellectual, and social needs. 
Italy could not avoid this tendency. She had, moreover, to shoulder 
the heavy burden inherited from the past, and this accounts for the 
fact that in the thirteen years covered by the period 1913-14 to 
1926-27 public expenditure, exclusive of liabilities incurred in con- 
nection with the Lybian and the World war, and from those connected 
with the postal, telegraphic, and telephonic services, organized as 
an autonomous concern, and others connected with the improvement 
of the currency and the construction of railroads, has risen from 
2,334 million lire to 19,571 million. But during the same period the 
uotation for gold rose im par in 1913-14 to an average of 476 
per cent in 1926-27, so that expenditure for this last year was equiv- 
alent to 4,111 million gold lire at the average rate of Italian 
xchange. 
{ The same thing has happened abroad. Great Britain which 
spe 197 million pounds sterling in 1913-14, appropriated 842,500,- 
during the financial year which closed on 31st March 1927, 
ides 63 million for redemption of debt. France has seen her 
Bee sttnre rise from 1913 to 1926 from 5,067 million francs to 
349 million, equivalent in gold to 6,670 million at the French rate 
exchange. 
_ This increased expenditure has of course been offset by a no 
important increase of receipts. In Italy tax receipts rose from 
2,355 million lire to 20,359, equivalent to 4,277 million gold lire. 
a Great Britain they rose from 198 to 806 million sterling; in France 
rom 5,092 million to 40,394 million francs, equivalent to 6,846 
i lion gold francs. 
| All Governments have thus seen their expenditure increase ai 
the inevitable corollary of increased fiscal pressure to secure the 
means to meet the new and major needs which have gradually made 
themselves felt. 


C33] 


474 


In Italy expenditure has increased by 176% and receipts by 182%; 
in Great Britain expenditure for the financial year 1926-27 amounted| 
to 427% of that incurred in 1913-14 while the figure for receipts| 
stands at 407%. In France expenditures and receipts in 1926 cor- 
respond respectively to 132 and 134 per cent of those for 1913.| 

The per capita burden of taxation, taking the increase of popu- 
lation into due account, amounted in Italy to 66 gold lire in 1913-14 
and to 106 gold lire in 1926-27 an increase of 40 gold lire per capita. 

During the same period the per capita coefficient rose in Great 
Britain from approximately Lst. 4.10.0 to Lst. 18; in France it rose 
from 127 gold francs in 1913 to 173 gold francs in 1926. 


THREE BUDGETS: 1925-26, 1926-27, 1927-28 


The Hon. Olivetti has reported on the Budget for 1925-26; the 
Hon. Tumidei on the estimated receipts for 1927-28; the Hon. 
Mazzini has analyzed the expenditures of the Ministry of Finance. 
The Ministry expresses its thanks to the Budget Commission and 
to the Reporters for the notable contribution they have made to the 
examination of the Treasury accounts. It is advisable to state in 
some detail the principles which guide the Fascist Government 
in the administration of the money which the Italian tax payer 
hands over to the Treasury with unequalled discipline, spirit of sac- 
rifice, and abnegation. 


THE FINANCIAL YEAR 1925-26. THE USE MADE OF THE SURPLUS 


The three budgets, those of 1925-26, 1926-27 and 1927-28 have, 
as I stated, exceptional features. The 1925-26 budget was affected 
by the appropriations made in the estimates for interest payments 
on the war debts; the cancelling of this sum reacted in the degree 
already known to the Chamber on the surplus realized during that 
year, while the revenue receipts were swollen by the last period of 
inflation, limited though it was. The result of these circumstances 
was a surplus of 2,268 million lire which the Reporter on the Ac- 
counts analyzes and classifies with much sagacity. 

We have drawn on this surplus to the extent of 1,800 million 
lire for reconstruction purposes and the defence services; of that 
amount we have so far expended 1,393 million lire. : 

Of this sum we have assigned 480 million lire for replenishing the 
army stores which had fallen below normal ever since the close of the 


C34] 


a 


475 


/war. Of the remaining amount, 377 million lire have been assigned 
for public works, inclusive of those for repairing damages caused 
by earthquakes, subsidies to hydro-electric plants, and works in 
the City of Naples; 54 millions for colonization works in Tripolitania, 
railway construction in Erithrea, and other constructive colonial | 
works; 182 million for the conservation of our national art treasures, ~ 
for encouraging scientific study and research, and for various under- 
takings which have in view the intellectual, social, and economic 
progress of our Country; 73 million lire for purchasing and adapting 
buildings to house public institutes and offices, including those for 
our representatives abroad; 227 million lire for sundry expenditures 
in behalf of currency rehabilitation and economic reconstruction. 
407 million lire remain in hand. Of that amount 199 million lire are 
pledged under law for expenditures connected with economic recon- 
'struction such as the intensification of measures for developing and 
encouraging wheat cultivation, public works, railways, aqueducts, 
‘the erection of hospitals, and other minor purposes. 
When these allocations have been taken into account a sum of 
‘nearly 208 million lire remains available. It will be utilized in 
‘carrying out a program which, among other reconstructive needs, 
takes into account those connected with currency revaluation. 

This exceptional appropriation of 1,800 million lire from the 
‘surplus obtained during the financial year 1925-26, itself excep- 
tional and unlikely to recur in a like amount, is entirely in keeping 
‘with the program of the Government which, ever since it came into 

power, has based its action on the financial reconstruction of the 
State and the economic reconstruction of the Nation, interdependent 
problems of like importance. 

Two ways lay open to us: the large surpluses secured by a strict 

financial policy could have been applied to reducing debt and easing 
the Treasury situation, or they could be applied to stimulating 
directly the productive energies of the Country. 
_ The latter alternative seemed preferable, and we have provided 
otherwise for the National Debt. We cannot forget that the Fas- 
cist régime took over a situation rendered very serious by the long 
‘antecedent period during which vital and urgent problems had been 
neglected. 

I must, however, insist on the statement I have just made to the 
effect that the assignment made on the surplus of 1925-26 is of an 


[35] 


476 


exceptional character, and cannot be claimed as a precedent as lon g 
as the process of monetary revaluation is under way. During that| 
period all the resources of the Ministry of Finance will have to be 
devoted exclusively to ensuring a balanced budget. ; 
Contingent events do not allow of our carrying out a policy which | 
would in any way pledge the surplus of receipts over expenditure. 
Moreover, the Government, within the means at its disposal, has | 
already attended to the solution of great and important problems. | 
As I have stated, it has provided for intensifying and improving | 
the technical and economic progress of agriculture with special | 
reference to cereal crops, for the reorganization of our schools, for} 
the protection of our art treasures, for the investigation and utili 
zation of the natural resources of our country. ; 
The Government has devoted special attention to the preparation | 
of an organic and scientific program of public works for strictly 
economic ends. 
That this is one of the fundamental points in the Government’s 
program for economic reconstruction is shown by the fact that in’ 
addition to the 5,653 million lire allocated for such expenditure on 
November 1, 1922, it has authorized a further outlay of 12,553) 
million lire for works to be completed not later than the financial 
year 1935-36. 
In four and a half years a sum of 8,872 million lire has been pledged, 
whereas, during the whole period from the formation of the Kingdom 
until 1922 the total expenditure on such public works only amounted 
to 8,891 million lire, lire, of course, which had then a higher value. 
The Southern provinces and the Islands, long neglected, have 
claimed the close attention of the régime. From the total new 
expenditure authorized, amounting as we have said to 12,553 million 
lire, we must deduct 3,715 million assigned for railroad construction, 
workmen’s dwellings, and general services by which the aforesaid 
regions will benefit to a large extent. Of the residual 8,838 million 
lire, the Southern provinces and the Islands account for 5,091 million, 
i. e. for 57.70% of the amount. 
This percentage is altered but little if we take into account only 
the sums definitely pledged, as of the 8,872 million lire corresponding 
to the total amount pledged, 2,282 refer to expenditure which can= 
not be distributed geographically; 1,568 million lire will be spent 
on works for North Italy, 1,311 for Central Italy, and 3,711 million 
for the South and the Islands. 


[ 36 J 


477 


These figures, indicative of the work so far done, should be sup- 
plemented by those for works now being studied, the cost of which is 
estimated at 3,354 million, affording clear proof of the keen con- 
stancy with which the stimulus given by the Government to the 
solution of one of the gravest of our national problems is being 
‘transformed into concrete action. 


Sig. Olivetti, Reporter for the General Budget Commission, re- 
ferring to the Treasury accounts for the financial year 1925-26, 
calls the attention of the Government to the residual liabilities, which 
are on the increase, and notes more especially the influence they 
‘may have on the future status of the cash balance. 

Apart from the fact that the increase of residual liabilities on 
June 30, 1926 was mainly due to the 1,800 million lire ear-marked on 
‘the surplus of the financial year which had just closed—a fact ad- 
mitted by the Reporter—I can assure the House that the Ministry 
‘of Finance has not failed to give its close attention to this chapter 
‘of expenditure. Measures have been taken to ensure strict control 
jover the assumption of liabilities in accordance with the provi- 
‘sions of the general accountancy law of the State; at the same time 
asset and liability items have been subjected to revision by inspectors 
‘of the Ministry so as to eliminate any not justified by sure and 
certain credits and debits; and steps have been taken to hasten the 
‘settlement of those which refer merely to accountancy balance items. 
_ The Reporter has also remarked that variations introduced into 
the estimates during the financial year weaken parliamentary con- 
trol over expenditure. 

On this head I would note that the finance law contains provisions, 
to which effect has been given for the first time by the Fascist Govern- 
ment, undoubtedly helpful in limiting such variations, as they for- 
bid the authorization of new or heavier expenditure uncompensated 
by corresponding reductions of other allocations. 

The recommendation made by the Budget Commission will 
strengthen the Government in resisting the growth of expenditure, 
but we must not fail to take into consideration the fact that the 
estimates are drawn up at least eight months before the opening 
of the financial year. It does not seem possible that events should 
not occur during so long an interval, and in such changing times, 
which may compel the assignment of increased funds. 


Eand 


478 ] 7 

The Government, however, is working resolutely and assiduously! 
to limit expenditure so as not to compromise one of the most im- 
portant successes achieved by the Fascist régime, that of balancing 
the budget. 


Sig. Olivetti also recommends that steps be taken as soon as| 
possible for ensuring the gradual amortization of the National debt. 

Undoubtedly this is a matter of special importance; the Govy- 
ernment has already shown its intentions when it placed on the 
estimates a sum of 500 million lire for the reduction of the bank note 
circulation debited to the Treasury, and when it provided for re- 
turning 360 million lire to the Cassa Depositi e Prestiti on account 
of sundry advances to the State. 

Other recommendations made by the Budget Commission refer 
to the transfer to the Exchange Institute of all transactions in foreign 
specie, the transfer to the Bank of Italy of all those referring to securi- 
ties, and the advisability of adopting rules which would allow of 
differentiating between gold and paper valuta in the statement 
of discounts and cash balance. 

These suggestions involve very delicate questions which will 
be examined with the closest attention in view of possible action; 
and all the other remarks and recommendations made by Sig. Oli- 
vetti will be taken into consideration as far as possible. 


THE FINANCIAL YEAR 1926-27 


On the whole the results of the financial year 1926-27 may be 
considered quite satisfactory although it differs somewhat from 
1925-26, more especially owing to the recent monetary policy of 
the Government. On the one hand receipts from German repara- 
tions disappear for the first time from the Budget, as they are paid 
over in full to the Fund for the amortization of our war debts, which 
works under the supervision of the Cassa Depositi e Prestiti, and to 
which I shall refer further on. For the same reason the item re- 
ferring to interest on war debts disappears from the estimates. Re- 
duced in accordance with the terms of the settlements they are now 
met by the Amortization Fund. 

Another novel feature introduced into the budget for 1926-27 
is that of including among normal expenditure outlays on railway 
construction which hitherto figured in a special chapter, and which 


[38 J 


479 


amounted, during the first ten months of the year, to 208 million 

lire. 

_ The State Railway administration under strict and wise manage- 

ment has become a model of its kind; but the needs of the Country 

will soon require it to build newlines, and therefore to incur additional 
| expenditure. It will also have to carry out on a larger scale the 
electrification of the lines, already studied in all its aspects by the 

Ministry of Communications. 

_ When these needs arise we shall have to review the present system 
of charging such expenditure to the Budget, thus meeting capital 
expenditure out of ordinary revenue resources; but meantime this 
liability can be so met during the current financial year and in 
1927-28. 

The more important measures connected with monetary policy 
affecting the Budget are both direct and indirect. A direct measure 
is that taken in September 1926 which placed an item of at least 500 
million lire a year on the estimates to reduce the note circulation 
issued by the Bank of Italy on account of the Treasury; indirectly 
this policy affects the Budget by the reductions which have occurred, 

| more especially in recent months, on customs’ agio receipts, in the 

tax on transfers of goods and property, and in general on those items 
of revenue most affected by the revaluation of the lira. 


——- 


| 
_ The estimates for the current year as approved by Parliament 
authorized an expenditure of 18,353 million lire against estimated 
receipts amounting to 18,543 million, leaving a surplus of 190 million 
lire. 
_ At the end of April, when ten months of the financial year had 
elapsed, estimated expenditure had risen, as a result of budget 
variations, to 20,391 million lire, an increase of 2,038 million, ac- 
counted for by the above-mentioned reduction of note circulation, 
and by expenditure on the colonies, public works, prisons and reform- » 
-atories, maritime services and ship building, the contribution to 
the City of Rome, war pensions, the services of the Ministry of 
Foreign Affairs, the army, the services of the Ministry of Finance 
: more especially in relation to the growth of revenue, contributions 
and premiums to industry and agriculture, special welfare work, 
public health services, etc. 

Special mention must be made of the interest charges in connection 


[39 ] 


480 j 


with the Lictor’s Loan of which only 138 million lire are a permanent 
charge, the remainder being accounted for by temporary charges 
consequent on the conversion of Treasury Bills, as a result of dif- 
ferences in the dates of maturity for accumulated interest on said 
bills and on the consolidated stock. 

As against the figures above set forth the amounts pledged during | 
the ten months which closed at the end of April amounted to 
16,996 million lire. 

But during the same period the returns for receipts also show a 
remarkable increase. As against an estimated amount of 18,543 | 
for the whole financial year, the returns for the first ten months show | 
receipts for 17,251 million lire, an increase of 1,799 million lire over 
the estimated quota for that period. 

This increase is accounted for in varying degree by the several | 
categories of receipts. 

The yield of direct taxation has exceeded estimates by 485 million 
lire, almost all accounted for by income tax, which has continued 
to increase progressively, whereas the receipts from the house and 
land tax and from the surtax on income amount to about the sum | 
estimated. The yield of the special taxes on capital, on capital 
increases due to the war, and on war profits, shows a decline. 

This group of taxes is gradually drawing to an end, leaving a 
deficit which will have to be compensated. 

Taxation on transfers of wealth has so far yielded 285 million lirel 
in excess of the estimated quota. | 

The increased yield from indirect taxes on commodities is smaller. 
Excise duties fall somewhat below the estimates, while customs’ 
duties and maritime dues—inclusive of the duty on wheat—show a 
yield slightly in excess of estimates. 

A notable increase is that obtained in the yield of the monopolies, 
more especially the tobacco monopoly, due to increased consumption. 
The income from this source in ten months amounts to 2,705 million 
lire, 138 million lire more than had been estimated for that period. 
The receipts from the State lottery have yielded 248 million net of 
disbursements, as against an estimated 200 million for the ten 
months. 

Of minor receipts the most important is that obtained from the 
exchange quotas on import duties paid in paper currency, returned | 
for the ten months at 1,672 million lire as against an estimated _ 


[40 ] ; 


481 


1,042 million for the period. The difference has, however, been falling 
‘off of late owing to the fluctuations in exchange quotations. 

The budget of the State Railways as compared to that for the 
previous year shows the following variations: a slight increase in 
traffic receipts—3,438 million lire at the end of February 1927 as 
compared to 3,382 million on February 28, 1926; and a notable 
increase of expenditure accounted for to the extent of 100 million 
lire by the heavier cost of coal due to the British strike notwith- 
standing great commercial skill then shown by the Railway Adminis- 
tration. A large part of the increase is also due to the cost of upkeep 
of rolling stock and permanent way, and expenditure on staff, on 
pension increases, settlement of arrears, promotions, and supple- 
mentary compensation to railway servants, whose number is, 
however, steadily declining. 

The post-telegraphic and the telephonic services show satisfactory 
progress; the yield therefrom has increased as compared to estimates 
by 89 million lire for the former and by 13 million lire for the latter. 
| We are justified in believing that the joint surplus from the three 
‘services will yield the National budget an amount equivalent to that 
‘estimated in their several budgets. 

_ When we compare the total receipts returned for this period of 
17,251 million lire with total expenditure pledged for 16,996 million 
lire, we find a surplus on April 30, 1927 of 255 million lire. 

_ The estimates as approved by Parliament foresaw a surplus of 
! 190 million lire, the quota of which for the period elapsed would 
have been 158 million. The latest Budget statement therefore 
shows an improvement of 97 million lire over the estimates. 

_ Under the chapter “Variations in Capital Account” we would call 
attention to the figure of 2,509 million lire so far received from 
subscriptions in cash to the Lictor’s Loan. This chapter showed on 
‘April 30 a surplus of 2,218 million lire. 

| 


| FINANCIAL YEAR 1927-28 


The honorable members Tumedei and Mazzini in their report 
‘on the estimates of receipts and expenditure of the Ministry of 
Finance for the financial year1927-28 have subjected the budget toa 
minute and diligent analysis which reveals its substantial soundness. 

I will refer briefly to the comments they make on certain special 
points, 


[41 ] 


482 


The honorable reporters refer to the amalgamation of the two 
estimates for the expenditure of the Ministry of Finance and for | 
its receipts into one as being unpractical. This measure was take 
by Royal Decree of May 10, 1925, to give effect to wishes expressed | 
during the debates in Parliament on the budget. 

The two documents are closely connected in as much as the| 
Minister of Finance is responsible for both of them to Parliament, 
and the matter of both affords opportunity for a fundamental | 
examination of questions bearing on the general financial situation. 

Therefore to avoid repetitions in the debates and to afford them 
a basis which allows of a more thorough examination, it seemed | 
advisable from a practical standpoint to draw them up as one | 
parliamentary report, in which, however, the two parts are kept | 
distinct and separate. 

The Reporters are also of the opinion that the estimates under- | 
value receipts and expenditures. | 

Allow me to say that if at the beginning of the financial year the | 
estimates of receipts were placed at the highest probable figure | 
and the appropriations increased accordingly, a wider margin for 
allocations would be afforded to the Departments, nor would this ~ 
eliminate the need for further assignments. 

It would be more difficult to control the budget and the results 
would certainly be less favorable. 

But more especially would it be inadvisable to raise the estimates 
at a time when currency revaluation will evidently lead to the 
gradual reduction of the large sums inscribed in the budget during 
the last few years. 

Neither does it appear that the Reporters are right in thinking” 
that we have left behind us the period of special war taxes and 
returned to the period of normal receipts. ) 

As a matter of fact the special war taxes (taxes on war profits, 
capital increases, special tax on capital and other minor items) 
figure in the 1927-28 estimates for a sum of 1,170 million lire, so_ 
that the definite transition to a fully normal tax situation can not 
yet be said to have occurred. 

The Ministry of Finance willingly accepts the recommendation 
of the Reporters as to the advisability of checking further expen- 
ditures; it corresponds to an essential need of the budget. 

The honorable members Tumedei and Mazzini, speaking of fiscal 


[42] 


483 


_ organization, referred, more especially in the case of direct taxation, 
to the grave matter of evasions, which they think could only be 
remedied by levying at rates lower than those fixed for 1929. 

I agree with the idea that high rates of taxation are perhaps 
| the main cause of evasions, and for this reason steps have been 
_ taken and are now being carried into effect for reducing them. 

__ The problem is anyhow a very serious one, and requires very 
| careful examination, especially in view of present economic events, 
as a reduction in rates, unless compensated by a considerable in- 
crease of yield, would endanger the equilibrium of the budget. 

I agree that it is advisable to bring the tax on agricultural income 
into due relation to land valuations for purposes of taxation. For 
this reason I have recently appointed a Commission to study ways 
_and means to assess this tax on the basis of the coefficient of increase 
of the land tax valuation. 

I also agree with the remarks made by the Reporters with reference 
_to the progressive surtax on income, more especially as to the need 
of conferring greater elasticity on this new tax and of affording to 
| the organs of the Ministry of Finance the means of making sure 
that it attain its purposes of securing an adequate addition to the 
_ revenue. 

The honorable members Tumedei and Mazzini conclude by urging 
_ the advisability of concentrating attention on the growth of expend- 
: iture and of following carefully the status of the cash balance, and 
| they call attention to the danger which a further increase in liabilities 
: might entail. The Government fully agrees with these remarks and 
intends to exercise timely and vigilant supervision in this field. 

| Having said this, I would remark that the estimates for 1927-28, 
| 


with the variations submitted on February 11, 1927, show a surplus 
of receipts over expenditure amounting to 291 million lire, and a 
deficit in the chapter ‘‘variations in capital account’? amounting to- 
| 264 million lire. 
| The surplus is the result of receipts amounting to 19,620 million 
| and expenditure amounting to 19,329 million lire. 
| If we compare these figures with the original estimates for 1926-27, 
: we find an increase for 1927-28 of 1,077 million lire in receipts and of 
976 million lire in expenditure, showing an improvement of I01 
million lire. 
But as the estimates for 1927-28, unlike those for the current 


[43 ] 


484 


\ 


financial year, include the aforesaid 500 million lire appropriate 
for the rehabilitation of the currency, as well as funds for meetin 
the increased cost of the service of the debt in connection with th 
Lictor’s Loan, both appropriations of an exceptional nature, the | 
expenditure incurred for normal administrative needs is seen to be 
75 million lire less than that provided for in the estimates for 1926-27. 
This result has been made possible by the firm determination of ; 
the Government to take the estimates for the current financial year, 
with the exception of the special appropriations above referred to, as 1 
an insuperable limit, so that the new and heavier liabilities recognized 
as strictly necessary have been financed without over-burdening the 
general situation. 
Moreover, the new estimates do not take into account the effects | 
of the gradual revaluation of the lira, for the efficacy of the steps” 
taken toward that end only began to make itself felt after the budget | 
had been submitted’ to Parliament. The Government, ae 


to make the requisite reductions in tHe’ estimates. j 
We have not taken into account the effect of the reduction recently | 
made in the high cost of living bonus granted to the several categories | 
of government servants. No reliance should be placed on the margin ! 
such reductions may yield, as it will only partially compensate the 
losses which may result from the contraction of revenue from sources" 
directly influenced by fluctuations in the value of the currency. 
The stated increase of 1,077 million lire in receipts as compared ~ 
to those assessed in 1926-27 is accounted for to the extent of 70 
per cent by the principal sources of revenue, i. e. by the tax on 
business, direct taxes, and receipts from the monopolies and the 
lottery. On the other hand, the estimates for receipts from taxation 
of commodities are reduced in accordance with prudent valuations. 
As regards expenditure, larger appropriations have been made 
for the Ministry of the Interior, for promoting the growth of our 
merchant marine and the efficiency of our maritime services, to meet 
requirements connected with the gradual economic settlement of 
our colonial possessions, for salaries and pensions to school teach- 
ers, and finally, to meet the needs of the Ministry of Finance, more 
especially in connection with the collection of revenue. 
Under the chapter ‘‘ Variations in Capital Account” at which we 
must now glance, increased receipts amounting to 144 million lire 


[44] 


485 


are offset by an increased expenditure of 287 million lire. I will 
‘call your attention, in considering the items which make up this 
last figure, to that of 152 million lire for retiring the 3.50 per cent 
bonds, issued for the reparation of war losses in the Venetian prov- 
inces. This expenditure will bring about an improvement in our 


capital situation. 


LOCAL GOVERNMENT BODIES 


The whole policy of the Fascist Government in the administration 
of internal affairs and more especially in the introduction of the 
régime of podestas in all the municipalities of Italy, entails greater 
“need of State intervention in regulating the financial policies of the 
local government bodies, and for this reason the supervision of local 
finance has become one of the main tasks entrusted to the Ministry 
of Finance. 

I would remind you that the total receipts of all the 9,137 munic- 
ipalities of Italy roughly approximated in 1925 the sum of 4,110 
million lire, without taking into account variations in the capital 
“account, sundry receipts, and special accounts. 

The total receipts for 1925 of the 76—now 92—Italian provinces 
amounted to 892 million lire without taking into account the afore- 
_mentioned accessory items. 

_ Thus the receipts of the municipalities and provinces amounted 
in all to less than one third of the Government tax receipts, which in 
1925-26 amounted to 16,365 million lire. 

On January 1, 1927, the total indebtedness of the provinces and 
| municipalities amounted to about 7,500 million lire, while the 
| National indebtedness, as already stated, amounted to about 90,000 
million lire; hence the former amounted to about one twelfth of the 
latter. 

The largest creditor of the municipalities and provinces is the 
“Cassa Depositi e Prestiti.’” On January 1, 1927, it held a credit 
of 4,379 million lire against them. 

__ The problem of local government finance, even though it does not 
exceed these limits, is none the less a serious one, deserving of the 
Government’s close attention. 

So that all may have the opportunity of understanding the con- 
ditions, two volumes have just been published by the Ministry 
of Finance, the first of which contains the budgets of all the muni- 


[45] 


486 


cipalities and provinces of Italy, and the second the rates at which | 
they levy the several surtaxes on land and buildings, the disparity | 
between their receipts and expenditures, and the outstanding loans 
they held on January 1, 1925, exclusive of the Provinces recently 
created. 

I may state that the surtax on land is collected by 4,500 munici- 
palities out of the 9,137 at the usual rate of 3 lire for each lira of 
government tax; 1,200 collect it at the rate of 4 lire, and the residual | 
number at varying rates, rising in some cases to exceedingly high 
figures which will have to be revised. 

The surtax on buildings was collected at the normal rate of 75 
centimes for each lira of Government tax by 4,100 municipalities; | 
1,700 collected it at rates which do not exceed 1 lira; and 3,000 at | 
varying rates; only 300 municipalities apply rates amounting to 6 
lire and over. 

The 76 provinces existing in 1925 had a total expenditure exceed- 
ing 980 million lire and receipts exceeding 890 million lire; 27 of 
them balanced receipts and expenditure or realized a surplus; the 
others had small deficits; only 10 had deficits amounting to 50% 
of their receipts. 

The problem of provincial finance still needs to be revised and I 
intend to make proposals toward this end, drawn up jointly with the 
Minister of Public Works. For instance, the problem of financing 
road up-keep, now entrusted to the local government bodies, should 
be solved by a more reasonable and organic distribution of the costs. 

As shown by the aforesaid publications which I recommend to 
the attention of all Parliamentarians and public administrators, the 
chief towns of provinces show a total expenditure amounting to 
nearly one half of the expenditure of all the municipalities of the 
Kingdom, and they also account for half the total deficit, estimated 
at a total of 890 million lire. 

In 1912 the total deficit of the municipalities was estimated at 
176 million gold lire; therefore, at the rate of about 5 paper lire to 1 
gold lira prevailing in 1925, the deficit then amounted to 880 million 
lire, i. e. to much the same figure as that estimated at 900 million 
lire in 1925, and this notwithstanding the admitted increase in the 
cost of all services, and more especially the increase in the population 
which amounted to 6 million inhabitants from 1912 to 1927. 

Taken as a whole, it cannot be said that the administration is 


[ 46 ] 


487 


‘very unsatisfactory when we bear in mind the fundamental changes 
in public services, housing conveniences, and general improvements 
which have occurred throughout Italy. 

| One-third of the Italian municipalities have no need of financial 
help, and of the other two-thirds one thousand have a deficit not 
exceeding 5 per cent of their receipts; for another thousand it does 
not exceed 10 per cent; for 500 it does not exceed 20 per cent; and 
it is only for the remainder that the deficit rises to higher figures. 
The Decree Law of October 20, 1925, which I proposed as a 
first step toward the settlement of local government finance, embodies 
two new principles affecting the sources of revenue available to muni- 
Cipalities. One is contained in the undertaking not to burden the 
“municipalities and provinces with services of a governmental nature 
‘without providing them with the requisite means. The other con- 
‘sists in the assignment by the State to the local government bodies 
of a percentage of certain taxes it levies, which are capable of yield- 
ing increased revenue, such as the tax on tobacco and on exchanges 
of wealth. These measures have been carried into effect, and the 
second has yielded good results, and perhaps points the way to further 
developments in the same direction. 

This whole subject is in a state of evolution and requires con- 
tinuous study by the Government. Further bold measures are 
_now being prepared to secure a fuller and more satisfactory solution 
of the whole problem. 

_ The most important source of revenue for the municipalities 
are the town duties on commodities and the surtaxes. With regard 
to these duties, I consider receipts from this source must be main- 
‘tained and perhaps increased, but the mode of collection must be 
thoroughly revised and altered, and if possible the antiquated and 
vexatious town customs’ barriers, described by the Prime Minister 
as barbarous, should disappear, as they have in almost all other 
“countries. They are an anachronism which a foreigner finds it 
difficult to understand. He confuses the frontier customs’ with the 
town-customs’ barriers and enquires how many customs there are 
‘in Italy, and wonders whether perchance the customs’ barriers of 
the States into which Italy was formerly divided have survived her 
‘national unity. 
The problem is not an easy one to solve. 
_ As regards the surtax on land, to which some speakers have made 


[47 J 


488 


impassioned reference, I would remind you that the revenue drawn| 
from the land-tax by the Treasury amounts to only 150 million lir | 
per annum and that from the tax on buildings to 290 million lire per 
annum. Land and buildings are therefore mainly taxed in the in-| 
terest of local government finance, which obtains therefrom nearl | 
1,500 million lire without any outlay, as the cost of collection is| 
met by the State. 

I believe my predecessor acted wisely in blocking these surtaxes | 
but the measure was a provisional and not a final one. It is still] 
in force, subject to exceptions which the Ministry of Finance au- 
thorizes in cases of real need. Anyhow, the problem is still open 
to examination from other points of view. 

The Hon. Celesia, speaking on the problem of local finance, urged. 
the Government to exercise a stricter control and to provide itself| 
with further means of action. I do not deny that the present super-| 
vision could be improved; and I accept his resolution as a recom= 
mendation, but I have greater belief in a further, though not final, | 
revision of the financial organization of the local government bodiell 
and I trust it will soon be possible to carry this into effect. 

Any Minister who believes that he can write the word “‘finis” 
at the end of the chapter of local government finance would be, 
to say the least, very naive. The problem of municipal life is the 
problem of the Italian Nation itself, and like it is in a state of per- 
petual motion. | 

While dealing with local government policy we must note the inter- 
vention of the State in behalf of the Capital, which has been organized 
as a Governorship with a large budget of its own which I have ex- 
amined and approved. 

While many capitals cost their respective Governments large 
sums the Italian Government assists its Capital by a grant which 
cannot be considered as very large. It has recently been fixed at 
an annual sum of 5° million lire with an additional 10 million for 
the ‘Agro Romano.’ 

The Treasury, as far as its means would allow, has also assisted the 
City of Naples, deserving of the consideration in which it has always’ 
been held by the Fascist Government. It has likewise come to the 
assistance of Palermo to enable that important city to meet funda- 
mental needs felt for many years past. The Government has en- 
tered into important agreements with the municipalities of Genoa, 


[48 ] 


489 


Milan, and Naples for the erection of official buildings and barracks, 
‘in return for which it has made over to them state property owned 
in those cities. 

The Provveditorato Generale dello Stato, which administers 
Government property, had indeed called our attention to the need 
of providing suitable accommodation for all government services in 
buildings owned by the State, and also the advisability of making 
Over to the municipalities government buildings no longer suited 
to meet the requirements of the service. 

State lands have also contributed largely to the funds for build- 
ing houses for government employees; free grants have been made to 
14 of the leading Italian cities of an area of over 160,000 square 
meters of such lands. 

There has been a notable increase in the sale of Crown property 

not needed for public services nor for the preservation of the art 
treasures of the municipalities. The receipts obtained from such 
property amount to nearly 14 million lire during the past three 
financial years. On the other hand, the Government has obtained 
' possession of important properties for an amount practically equiva- 
lent to that received from the aforesaid sales. Thus in Rome it 
now owns “Palazzo Spada,” the seat of the State Council; the 
“Farnesina,’’ the future seat of the Italian Academy; “ Palazzo 
Giustiniani,’’ used to enlarge the accommodations for the Senate; 
“Villa Aldobrandini’’ which will be assigned to the International 
Institute of Private Law founded by the Italian Government; and 
_ other minor properties. 
_ Among the exchanges made with municipalities that by which 
_the promontory of ‘‘San Benigno” is ceded to Genoa for the enlarge- 
ment of the port is of importance, as is also that by which property 
used by the navy was made over to Naples to complete the great 
promenade recently built along the sea-coast. The military hospital 
at Milan has been ceded to the Catholic University and a new Military 
Hospital has been built. 


CASSA DEPOSITI E PRESTITI 


The activities of the local government bodies are closely con- 
nected with those of the Cassa Depositi e Prestiti. 
This Bank administers a capital of over 21 thousand million lire 


[49] 


490 


offset by liabilities amounting to 16 thousand million, it therefore 
has net assets exceeding 5 thousand million lire consisting of reserve 
funds and of the capital of the following bodies: The Pension Func 
for school teachers; The Pension Fund for persons in the employ of 
local government bodies and charitable institutions; The Pension 
Fund for medical men; The Pension Fund for magistrates; Thel 
Pension Fund for the land-register experts; The Pension Fund fo; 
employees in notaries’ archives; and The Provident Fund for the| 
civil and military employees of the State. , 

The capital of the above Institutes, which are growing rapidly, | 
will soon amount to no less a sum than 2 thousand million lire. 

The Fascist Government desired that these Institutes should come 
to the assistance of the Cassa Depositi e Prestiti so as to enable it! 
to secure the results which it seeks to attain in the field of credit 
enterprise. This help was needed at the present time, as the growth | 
of the postal savings funds from which the Cassa Depositi e Prestiti 
draws its normal resources, reinvesting them in loans, has suffered | 
from the revaluation of the lira, which hinders the formation of new 
capital on a large scale. 

The beneficent activities of Provident Institutes, in collaboration 
with the effort made during the first half of 1926 by the Cassa Deposi- 
ti itself, has secured during 1926 the following results: 


| 
‘ 
ui 


a. Loans to local government bodies for 
aqueducts, sanitation, schools, and various ; 
purposes... . - «6 dah, B7G820,/786 

b. Loans for Boy ceataeee ne the Apalan 
Aqueduct, reparation of damages caused by 
earthquakes, and for the erection of houses L. 84,474,056 — 

c. Loans for special transactions carried out 
with the assistance of other banks ... L. 59,831,600 ~ 


Total oc. 8 oo al ar Gre 


If we add to the loans made in 1926 those previously granted, — 
net of cancellations and amortization payments for the year, we 
arrive at the conspicuous sum of lire 5,812,117,554.63 loaned by | 
this bank. 


[50 ] | 


| 
} 
{| 


491 

TAXATION POLICY 
In the field of direct taxation the Fascist Government has adopted 
a policy to which I have unswervingly adhered, but which yet calls 


for many efforts before the goal can be attained. 
It will be reached when we have few taxes, skillfully devised, 


proportionately assessed, but paid by all. 


Vexatious taxation is repugnant to the Fascist mind, and to this 
category belong all those small, ill-defined, and tiresome taxes which 


| yield but little to the Treasury and cause a lot of trouble to the 
| tax-payer. For other and nobler reasons, and in view of high moral 
_ends, the Government has renounced the conspicuous yield obtain- 

able from death duties on property transmitted within the family 
circle. It is gradually repealing those taxes which were a product of 
| the war, and has spared no effort to settle as rapidly and as satis- 
| factorily as possible the tax on capital. 


The main tax is that levied on personality, (ricchezza mobile) 


'which again this year has yielded a large revenue, and which can 
_ be made to yield a still larger one. I must admit that the honorable 
'members Barbiellini and Morelli have rightly drawn attention to 
the phenomenon of fiscal evasion. Government employees pay on 


an average per capita income of 11,365 lire, under category D, with- 


out any chance of evasion; the data for the other categories of pri- 
vate tax payers compare with the above average income as follows: 
the income tax roll for 1926 shows 929,000 traders and manufacturers 


returning a taxable income of 4,250,000,000 lire, i. e. an average per 
capita income of about 4,570 lire; while 119,000 professional men re- 
turn a total income of 534 million lire, i. e. a per capita average of 
about 4,487 lire. 

An examination of these averages affords the clearest evidence of 
the degree in which professional, commercial, and business incomes 
escape taxation, while the limited number of persons inscribed on the 
rolls shows that a very large number escape income tax altogether. 
The Hon. Rotigliano has referred to income tax levied on workmen, 
a matter the Government has in mind. Besides wage-workers in 
government employ, who pay income tax at the reduced rate of 4%, 
other categories of workers are assessed and such taxation may be yet 


further enlarged. 


It is evident that much still has to be done to overcome tax eva- 
sions so as not to impinge yet further on the incomes of those who 


sn) a 


492 


honestly pay what they owe to the Treasury. Something has already 
been done in this direction. It must be borne in mind that on th 
Ist of Januaryof this year the rate at whichincome taxislevied was. 
lowered in accordance with the provisions of the Decree Law on the 
reorganization of the rates of direct taxation. This reduction has 
been accompanied by a rise in the exemption minimum which I have 
raised to 1000 lire awaiting the time when the !aw which raises if 
to 2000 lire will come into effect in 1929. Now these measures affected” 
the income tax rolls published in January 1927, entailing a decline 
in revenue which I estimated at 250 million lire, while a further re- 
duction of some 165 million is due to the gradual extinction of yield | 
from the payment of arrears due on repealed war taxes. 
Nevertheless, thanks to the energetic efforts made to avoid partial 
and complete evasion, the rolls for direct taxation published in 1927 | 
show a total increase of 200 million lire over those for January 1926, | 
During the current financial year interest on bonds issued by pub- 
lic and private corporations and on land credit bonds has been 
exempted from income tax; and reimbursement, assessed on the 
basis of losses shown by their balance-sheets, was granted to joint 
stock companies with regard to excess taxation paid under the well- 


| 


known system of assessment on the results of profits realized in , 
previous years. 

Other administrative and legislative measures have already ; 
come into force to encourage private initiative in the export trade — 
and in production, and to relieve trade and industry from anxiety — 
caused by fiscal burdens by means of an equitable revision of the ~ 
technical and practical rules under which income tax is levied, more : 
especially on companies and corporations. 

In the case of our foreign trade we are taking steps to climinatell 
a cause which leads to the denationalization of Italian coacecnall 
either by signing new treaties for the avoidance of double taxation, or 
by studying legal measures to be taken in our own country which 
will ensure equitable fiscal treatment to foreign branches of Italian 
firms. 

Tax exemptions have been granted in favor of agriculture and 
house property. Among these I would mention the remission of 
fines for failure to send in returns for income obtained from farms or 
for inaccurate returns made during the first year in which such 
income became taxable, and the provision contained in the Decree 


[52] 


493 


| Law of September 20, 1926, N. 1,643 under which land tax exemp- 
_ tions, granted on account of losses due to meteorological causes, are 
_ extended to income-tax levied on farmers. 
__ With reference to incomes derived from farming I would add that 
| I am studying a plan which will ensure greater equity in the appli- 
| cation of the tax on farm incomes as between owners who farm their 
| lands directly, and tenants. 
Good results have been secured by the measure under which 
| total exemption from taxes and surtaxes on workmen’s dwellings 
has been granted for 25 instead of 20 years, while partial exemption 
_ on other buildings, completed not later than 1940, has been restricted 
_ to a period of 15 years. 
_ Real estate has benefitted considerably by a measure authorizing 
the distribution of payment of arrears of the tax on capital, levied 
on the basis of assessments and revaluations, over the whole number 
of annuities still due. 
_ Other measures have been taken in behalf of the various important 
social works founded by the Fascist Régime, such as the National 
| Work for the Protection of Mothers and Children, the National 
Balilla Work, the National Welfare Work, etc. 

The only new tax enacted is that on bachelors. So far about one 
| million returns have been sent in by individual tax-payers and 
| employers of labor. The Head of the Government has stated the 

reasons which justify this tax, the revenue from which will be 
| assigned to finance the Work for the Protection of Mothers and 
Children. 

As I have mentioned, the Fascist Government does not intend to ~ 
meet the budgetary stringency which may be expected as a result 
_of the revaluation of the lira by recourse to new taxes, but it is” 
_ essential that the Nation should acquire a notion of its fiscal duties 
and that all citizens should realize that in cheating the Treasury 
they cheat their fellow-citizens. I believe that this truth is making 
headway, and for its part the Government is taking measures to 
enable the several tax-collecting commissions to carry out their 
duties in a manner suited to the new conditions which have arisen 
and in accordance with the interests both of the Treasury and of the 
tax-payers themselves, 


L531 


494 


COMPENSATION OF WAR LOSSES 


As the Chamber knows, the duties which the former Ministry 
of the Liberated Territories performed were transferred to the 
Ministry of Finance, and it is advisable to saya few words on this 
subject. Italy is honored by the fact that she has provided out of 
her own means for the total reconstruction of the property destroyed 
during the war. To this task the Fascist Government brought, as 
it always does, a decisive contribution which can be shown by a 
few figures. 

At the end of 1922 decisions were accumulating by the hundred 
thousand, but the indemnities granted were not finding their way 
into the hands of the sufferers. Today, out of over one million 
claims, 800,000 had been settled by agreement on March 31, 1927, 
over 250,000 decisions had been taken regarding claims on which an 
agreed settlement had not been reached or which had been refused, 
140,000 verdicts had been given by the commissions, 330,000 claims 
had been acted on by the technical offices, and those still in — 
were but an insignificant remainder. 

At the end of 1922 the Treasury itself had paid out 538 million 
lire, and the major portion of the compensation claims had been 
left to the Banks which made advances to claimants. On March 1927 
the Treasury had paid out 2,246,000,000 of which 1,600,000,000 lire 
had been disbursed during the Fascist régime, a sum equivalent to 
three times that paid during the previous four year period, although 
that had been the period of acutest need. 

If we include in our calculation the advances made by the Banks 
on government funds we get a total of some 5,000 million lire for 
such payments. 

Among the banks, special mention must be made of the Istituto 
Federale di Credito per il risorgimento delle Venezie, which labored 
under circumstances of special difficulty. 

The reform introduced by me in January 1926 has speeded up the 
still remaining work to a degree which has exceeded our highest 
expectations. Superfluous formalities have been suppressed, con- 
ciliation boards have been introduced on a large scale, and have 
given excellent results. Thus the phase of the problem which at that 
date was still unsolved, that of the mass of work before the Courts, © 
has been settled, and out of 30,000 cases still pending at the end of 
1925, and 15,000 others still hanging over, only 4,500 were pending 


C54] 


495 


on March 31, ult., showing that 40,000 had been settled within 
a year. 

In the newly acquired provinces steps were taken to repair the 
losses suffered by the great industries of Julian Venetia, on which 
the economic revival of that region depended. The losses caused 
by the requisitions of the Austrian Government have been compen- 
sated by the grant of special facilities which do not run counter to 

international rights, and which have given general satisfaction. 

_ All this mass of work has been accomplished with a reduced 
staff. At the end of 1923, 187 offices with 1,586 employees were 
engaged on the task; the number has been reduced to 128 offices 
| with 1,125 employees, and the expenses for the next financial year 
are foreseen in the small sum of 3 million lire. 

This brief summarized statement of facts shows that the heavy 
task undertaken by the Fascist Government of compensating war 
losses and reconstructing the wealth of the Venetian provinces has 
been almost fully accomplished. 


THE CASSA AMMORTAMENTO 


The problem of war losses is connected with that of war debts. 

I need not remind you of the war debt settlements nor of the 
reductions secured by the Washington and London agreements, 
from a maximum of 130,000 million lire at the exchange rate then 
current, to an actuarial value which at present exchange rates is 
equivalent to 15,000 million lire, taking into account the payments 
already made, payable over a period of 60 years out of receipts on 
reparations’ account. 

As I have already stated, our Country has made a splendid effort 
in compensating war losses and meeting the heavy burden of war 
pensions amounting to 1,400 million lire during the current year, out 
of its own unaided resources, leaving German reparations to our 
war loan creditors. Nothing more than this can be asked of the 
Italian tax-payer. 

For this reason I will make a brief statement on the Autonomous 
Amortization Fund, which I proposed, and which is working most 
satisfactorily as a clearing house for war debts and reparations, under 
the sagacious administration of the Cassa Depositi e Prestiti. 

The reparation payments due to Italy from Germany under the 
Dawes plan are made regularly. Payments in kind are almost all 


[55 


496 


in the form of deliveries of coal made to the State Railways, which 
pay for them to the Amortization Fund; only a small part of the 
reparation payments is made in cash. 
The situation of the Autonomous Amortization Fund shows that 
the estimates made in the Decree Law of May 3, 1926, were con 
The Fund has provided already for the payment of the annuities” 
due to the United States and Great Britain, which matured on_ 
March 15, 1927. It has set aside the funds required for paying the 
quota falling due in June to the United States, and has begun to 
collect those which will be required for the payment to Great Britain | 
which falls due on September 15, next, the last for the current year. 
The funds already paid in and those due, on the basis of a conser- 
vative estimate, fully ensure the regular discharge of our liabilities | 
in this field. 
Our Ambassador at Washington has delivered to the Federal : 
Treasury the new bonds provided for under the debt settlement, with- 
drawing the old ones duly cancelled. A similar operation has been 
effected for the British debt. 
We can thus say that all is proceeding according to schedule. 


THE BANK OF ISSUE—BANKS—THE VALUTA AND ; 
EXCHANGE RATES 


One of the major tasks I set myself on taking office has been ac- | 
complished, i. e. the unification of the control of the currency and 
credit centered in a single bank of issue, the Bank of Italy. 

All great countries, in different but not dissimilar ways, have 
established a single important bank of issue, autonomous in the 
technical sense of the word, and capable of controlling with rapidity 
and firmness the complex questions involved in credit and currency. 

It can safely be said that the Bank of Italy meets these require- 
ments, and any further developments introduced to attain the pur- 
pose aimed at should only be considered as improvements made in 
its various organs to adapt them to their multifarious and ever grow- 
ing functions. ; 

The centralization in the Bank of Italy of the note issue, a privilege 
formerly shared with the Bank of Naples and the Bank of Sicily, 
has been carried out, notwithstanding the many transactions it 
involved, with the greatest tranquillity, rapidity, and accuracy. 
So much so that the measures taken shortly afterwards by the Fas- 


[ 56 J 


_-_— — 


EEE 


497 


cist Government to regulate more closely, check, and gradually 
reduce the note circulation were carried into effect without en- 
|countering any technical difficulties. 

It is well to remember that of the 3,780,000,000 lire worth of 
‘notes of the two Southern Banks which were outstanding, some 
2,480,000,000 have been retired and replaced, in the short period 
under consideration, by notes of the Bank of Italy. 

Without this unification I can state that with all the good will 
in the world, and notwithstanding the ability of the persons in 
charge, it would have been very difficult to exercise a severe control 
over the circulation and thus to lay the foundations for the rehabili- 
‘tation of the lira. 

_ During this transitory period the Bank of Naples has been chiefly 
engaged in internal revision and reconstruction; its new statute has 
‘already been approved by decree law, and will confer on it that 
agility and rapidity of action which are the characteristics of a bank 
‘created under law. It places the Bank in a position to fulfil the ex- 
|pectations of southern agriculture and commerce. 

The emergency administration of the Bank of Naples comes to ° 
an end with the approval of the new Statute. 

The Bank of Sicily, now better equipped and more concentrated, 

is also engaged in revising and centralizing its services, and in de- 
veloping those of its activities which are best suited to meet Sicilian 
needs; it also will soon have its new statutes and its permanent ad- 
_ministration. 
_ And here I wish to say a word of the new function entrusted to 
the Bank of Italy under the measures I proposed for safeguarding 
national savings by the Decrees of September 7, 1926 and November 
9, 1926. ; 

In this field also, as in that of the centralization of the issue pri- 
| vilege in a single bank, all the depressing anxieties expressed by over- 
zealous experts, who fail to adjust themselves to the rapidity of Fas- 
cist action, have been proven unfounded. Just as improvements 
in medical and surgical science reduce the causes of disease and death, 
so I believe that supervision exercised over banks rapidly lessens 
| disease among them and will definitely eliminate the danger of their 

death. Banking phenomena belong to the natural economic order, 
they develop along lines which escape excessive artificial constraint, 
but this is no reason for abandoning them to themselves or to the 


[57] 


498 


play of contrasting interests, more especially in times when national 
economy demands a reliable basis in the field of banking technique. 

There are too many banks in Italy; while the trend in all other 
countries is toward centralization, here they are multiplying. y 

In 1913 there were 43 banks in Great Britain with 5,793 branches; | 
in 1926 there were 18 with 8,676 branches. In the United States j 
the centralizing movement, placed under the auspices of the Federal 
Reserve System, has led to the disappearance, during the period | 
comprised between 1921 and the end of 1925, of about 2,000 joint 
stock and 80 national banks. In Germany centralization has taken 
place, accelerated since the monetary rehabilitation which took | 
place at the end of 1924, and it is still going on. In France and Bel- 
gium, countries with a credit organization similar to our own, steps” 
are being taken to secure a more organic organization of private | 
credit on lines not dissimilar to those we are following. For a long | 
time past the Scandinavian countries have supervised banks, en- 
couraging centralization by legislative measures similar to those 
enacted by the Fascist Government, measures which have given © 
the desired results. 

To curb the further spread of new banking activities in Italy, the 
Government has reserved itself the right to authorize the opening of 
new banks after consulting the Bank of Issue. It has left the banks — 
free in the exercise of their business but has placed limits on banking 
credit, so as to ensure its reasonable distribution and avoid its con- 
centration in a few hands. 

The Bank of Italy exercises general supervision, carried out by — 
very simple means, over all banks except Savings Banks, which are 
still under the supervision of the Ministry of National Economy. 

In times when monetary values and prices are changing rapidly, © 
banking is beset by many difficulties; old and unstable positions 
rapidly mature, and some dead wood has to be lopped off. But 
taken as a whole I feel it my duty to state that Italian banking ~ 
business—that of large and small concerns alike—is deserving of 
the greatest respect and consideration and the confidence of the 
public is shown by the steady growth of deposits, a phenomenon 
which in times like these is deeply significant. 

I do not wish to inflict on the Chamber theoretical disquisitions, 
which are moreover contradictory, on the subject of currency cir- 
culation and the way in which it feeds banking business and generally 
controls all economic relations. : 


[58 ] 


499 


‘The currency is one of the most highly complex, technical, psy- 
logical, I might say, political phenomena one can imagine. Even 
ose in possession of all the data may at times be surprised by new 
Situations, and theories and forecasts in this field are dangerous 
nd above all useless. I can however state without fear of con- 
tradiction that the quantitative control of bank notes and of their 
fuse affords the fundamental and decisive means for regulating the 
value of the currency. 
_ The total note circulation issued by the banks of issue, i. e. by 
ithe Bank of Italy, the Bank of Naples, and the Bank of Sicily, 
reached its highest level on December 31, 1920, when it stood at 
19,371 million lire in bank notes on account of commerce and 2,268 
‘million on account of the Treasury. 
When the issue privilege was centralized in one bank on June 
30, 1926, the total currency in circulation, exclusive of Treasury 
notes, stood at 18,342.8 million lire. This figure subdivided into 
11,613.4 million lire of bank notes issued on account of commerce 
sand 6,729.4 million issued on account of the State. As is known, 
ithe former are offset by commercial paper and securities, the latter 
only by the credit of the State, and should therefore be reduced to a 
minimum and gradually annulled. 
P. On April 30, 1927, the total bank note circulation had fallen to 
'17,578.4 million lire, 13,349 million on account of commerce and 
4,229.4 on account of the State. The reduction of the debt represent- 
‘ed by notes issued on account of the State, amounting to 2,625 
million lire, is accounted for to the extent of 125 million lire by 
‘the repayment of the statutory advances made to the two South- 
a” Banks, and for the residual 2,500 million by the cancellation of a 

€ amount of special note advances made by the Bank of Italy to 
the Treasury, through the cession to the latter of 90 million dollars, 
the net receipt from the Morgan loan, transferred by the Treasury 
to the reserves of the Bank of Italy. 

This undoubtedly helped to improve the quality of the circulation, 
which is moreover all at the service-of the market. 

The important fact is that the total circulation has been reduced. 
‘Treasury notes, of which 2,100 million lire worth were in circulation 
. June 30, 1926, have been reduced by 1,578 million lire by the 


ai] 


withdrawal from circulation of 25, 10, and 5 lire notes. 
The note circulation, consisting of Bank of Italy notes and of those 


[59] 


500 


still outstanding of the Southern Banks, amounted on May 20, ult. | 
to 17,159.9 million lire. Thus the Treasury note and bank note | 
circulation together amount to 18,737.9 million lire, as compared to | 
21,999.9 on December 31, 1920, and to L. 20,442.8 million on June 
30, 1926, a note deflation of 3,262 million lire as compared to 1920 | 
and of 1,704.9 as compared to June 30, 1926. And it should be 
noted that the Treasury notes will soon be replaced by 5 and 10 lire” 
silver coins and by a new issue of 20 lire silver pieces, so that it will | 
be a circulation based on precious metal of intrinsic value. 

Deflation, tenaciously carried out and carefully supervised not | 
only by the responsible Minister but also by the Head of the Govern- | 
ment, entailed some hardships last autumn, and credit restrictions © 
which have gradually relaxed. Indeed, the applications for advances | 
on securities and for rediscounts received by the Bank of Italy are 
now normal, while deposits are constantly increasing. ' 

On the other hand, the Bank of Italy and the Treasury have | 
persevered in the policy of increasing their gold reserves through the 
agency of the National Exchange Institute. 

The reserves of the Bank of Italy in gold bullion and specie and © 
in equivalent valuta, i. e. its gold credits, amounted on May 20, 
1927 to 2,812 million lire, inclusive of 489 million lire held by the © 
Bank of England under the well-known agreement; a first instalment 
of this gold will be returned to us next year. 

The ratio of the gold reserve to the 17,159 million lire in circulation 
on May 20, 1927, stands at 16.38 gold lire for every hundred paper 
lire, as compared to 10.78 gold lire for every hundred paper lire at 
which the ratio stood on June 30, 1926, when the currency in cir- © 
culation amounted to 18,342.8 million lire, and the gold reserves of 
the Bank of Italy, inclusive of those in London, to 1,977.2 million. 

At present exchange rates, which stand around 90 lire to the © 
pound sterling, 2,812 million gold lire are equivalent to 10,034.3 
million paper lire, so that the gold reserve represents a cover, at 
present rates, of 58.47%. 

But in addition to this cover there are the large sums held available 
for the Treasury by the Exchange Institute, largely as a result of 
the purchase of appreciated valuta obtained by foreign loans to 
municipalities and private parties and by direct purchases made out 
of the Treasury cash balance when favorable opportunity offered. 

This further large liquid reserve can at any time be used, in whole 


[ 60 J 


501 


in part, against delivery of its counterpart in Bank of Italy notes. 
This threat, which international speculation knows is held over its 
head by the Italian Treasury, affords a serious guarantee against 


exchange fluctuations and enables the Treasury to control them 
within certain limits. 


I have already spoken of the trend of exchange at the beginning 


_ of my statement: I will add a few figures. 


On July 1, 1925, the Treasury held only a few million dollars; 
exchange rates were stringent, and the dollar and sterling were 
severally quoted at 27.55 and at 133.60, with a tendency to a further 
‘rise. Government intervention was urgent to check speculation, 


_ but with only a few million dollars in hand and with the war debts 


unsettled, intervention could only take the form of manoeuvering 
the currency. For this reason the Treasury procured for the business 
of the nation and for itself eight months of relative calm with ex- 
change rates fluctuating around 120 to the sterling. This lasted 


' from September 1, 1925, to May 13, 1926; quotations were steadied 


by means of an exceptional movement of funds, the extent of which 
has been definitely stated in the accounts for 1925-26 recently 
deposited with the accountant of the portfolio at the Court of Audit. 
The cash turnover for that year amounted to 142,000 million lire 


_ as compared to 3,000 million in 1913-14; the portfolio orders to 34,- 


000 million lire as compared to 722 million lire in 1913-14. In spite 
of this colossal turnover, the account rendered confirms the summary 
statement I made to the Senate last year, when I affirmed that the 
loss incurred by the Treasury did not exceed 86,898,399.63 lire. 

In May 1926 all defensive action and all manoeuvering of the 
currency ceased, and Treasury transactions have returned to normal. 
The lira, after depreciating as I have stated to a much lesser extent 
than the French and Belgian franc, began, after the Pesaro speech 
and the resolute initiation of currency deflation, to recover, gradually 
rising to its present level. When relative calm once more prevailed 
in the money markets, the Treasury demobilized and transferred 
all its exchange business to be settled and wound up during the 
current financial year by the National Exchange Institute, which 
was equipped for its new tasks and has become the sole provider of 
appreciated valuta required for the needs of the State Administration. 

As the Prime Minister has already said, the Fascist Government 
dates the history of the valuta back to October 1922. The dollar 


[61] 


502 


was then quoted at 23.07, the pound sterling, at gold parity, to which | 
it had not then returned, at 106.35, the Swiss franc at 442.40, the) 
French franc at 177.82, the gold lira at 462.59. 

Today the differences in our favor are the following: on the dollar | 
5.80, on the pound sterling 18.08, on the Swiss franc 92.90, on the) 
French franc 106.40, on the gold lira 112. 


sali 


THE ISTITUTO DI LIQUIDAZIONE 


Securities which reflected the important residual liabilities inherited | 
from the bank failures of the post-war years for the settlement of 
which the Treasury had had to intervene through the Bank of Issue. | 

A Decree Law of November 6, 1926, suppressed this Autonomous ‘ 
Section and concentrated the task of realizing residual assets which | 
had been divided between several bodies entrusted with their | 
administration, in one body known as the “Istituto di Liquid- 
azione,”’ now in full working order and which is simplifying and | 
rapidly settling the several situations with a further gain in the k 
direction of currency rehabilitation, in so far as is compatible with 
the notable difficulties of the present economic situation. 

Two significant figures give an idea of the progress being made 
with these liquidations. 

The debt of the former Autonomous Section of the Consortium — 
to the Bank of Italy, net of the sums accumulated on behalf of the 
reserves, amounted on July I, 1926, to 2,072 million lire. 

The debt of the Liquidating Institute, which took the place of the 
former Autonomous Section, had fallen on April 30, 1927—likewise 
net of the accumulated reserves—to 1,608 million lire, a decline, 
therefore, of 464 million lire. 


THE NATIONAL DEBT 


~ Italy’s only national debt abroad is that of 100 million dollars | 
on the loan placed in America in November 1925 known as the 
Morgan Loan. We have begun its repayment in annuities for fixed | 
amounts spread over a period of 26 years. 

The corresponding debt in Italian lire will depend on the trend : 
of exchange rates. If it had to be repaid today it would be equiva- 


[ 62 ] : 


503 


ent, with the amounts already amortized, to approximately 1,770,- 
,000 lire. 

I have already spoken of the foreign war debts. 

The internal national debt stood on June 30, 1926, at L. 91,309,- 
000,000:—63,453 million lire of consolidated and 27,856 million of 
floating debt. 

I need not remind you of the great funding operation carried 
out last November connected with the issue of that loan known,by 
the desire of the people as the Lictor’s Loan, which afforded such 
a notable proof of national solidarity, over 3 million persons having 
subscribed to it. 

The Lictor’s Loan, in accordance with the requirements of ad- 
ministrative accountancy, will appear in the situation of the Na- 
tional Debt published in the Monthly Treasury Statement as soon 
as the script has been issued. On May 31, 1927, the situation of 
the internal National Debt, inclusive of all new subscriptions and 
the conversion of Treasury bills into securities of the new Loan, 
which amount to a sum of some 27,055 million lire, consisted of the 
following items: 


Meunnded debt ......-..-... .- - 984,584 million lire 
J SiS 2 a a 6,167. id:/ ad: 
Seteraldebton May3i ....... . 90,751 id. id: 


The statement I made to the Senate on December 9, 1926, is 
thus fully confirmed when I said, before the issue of the Lictor’s 
Loan, that the total internal debt would be smaller after its issue 
than it had been at the beginning of the financial year, notwithstand- 
ing the premiums given in nominal capital to the holders of Treasury 
bills who were required to convert them into consolidated stock. 
The facts also confirm my statement that the Italian people had sub- 
scribed the sum which the Fascist Government had asked for. 

The following succinct figures which can be easily remembered are 
those into which the National debt subdivides: 


PeeWee MS: so 2. « - = : - ~.. + Lo. I4ro.000;000 

National Loans 36,049,000,000 

Lictor’s Loan . , 27,055,000,000 

Nine-year Treasury Bods 7,275,000,000 

3.50% Venetian Bonds for the reconstruc- 
tion of the liberated territories 


[ 63 ] 


ae 


1I,204,000,000 


504 


4.75% bonds maturing in 25 years. . . . L. 572,000,000 
Treasury notes ... ““_1,713,000,000 
Bank note currency sound on ac oe of Treen 

ULV ee Ee. a a 
Interest bearing current ac / with the Cassa 

Depositi e Prestiti,.-.\.. 2) nnn 225,000,000 


Besides 10 million lire of 4.36% redeemable Austrian debt, in 
all a debt of 90,751 million lire. 
It should be remembered that on June 30, 1923, the National 


Debt amounted to 95,544 million lire, and it is then evident that © 


the Fascist Government has radically solved the question of the 
floating debt which now amounts to only 6.66% of the total, and 
consists exclusively of bank notes in circulation and of Treasury 
notes, whereas on June 30, 1923, it amounted to 63.33%. At the 
same time the total national debt has been reduced by over 4,000 
million lire. 

As you know, an annual sum of 500 million lire is now provided 
in the estimates for the gradual elimination of the debt represented 
by the present bank note circulation on account of the Treasury 
and, as I have stated, the nature of the Treasury note debit is being 
modified by replacing notes by silver. 

Lesser sums are assigned for the amortization of the 3.50% con- 
solidated stock, and for the other debts already figuring in the 
Treasury accounts. 

As I stated at the time of the funding of the floating debt, the size 
of that debt was a danger to the Treasury as it had been for the 
Treasuries of our Allies, who in various ways had to take measures 
in its regard. 

The Treasury bill is an excellent instrument of credit which in 
due time will again be introduced by the Italian Treasury. Its func- 
tion is more especially that of regulating the flux of receipts and ex- 
penditure as reflected in the cash balance. But when it becomes a 
permanent short-dated debt it is a danger. 

At the beginning of the year the British Government issued a 
loan for the conversion of Treasury bonds but it still makes constant 
use of Treasury bills. 

The French Government, which has made over to a special Amorti- 
zation Fund all the National Defence Bonds and Treasury Bonds 
outstanding on October 1. 1926, also has authority to issue bills 


[ 64 J ‘ 


595 


up to a limit of 5,000 million francs, a right to which it has had 
recourse. 

For the present our normal cash resources have acquired remark- 
able elasticity, and we can meet the important coupon of the Na- 
tional debt which falls due on July out of normal Treasury resources. 

The Ministry of Finance has already announced that on July 1, 
the bearer bonds of the Lictor’s Loan—there are nine million of them 
—will be delivered and they will be consigned to the holders in 
monthly batches not later than December 31, of this year. 


Gentlemen of the House: 


I have had to make heavy claims on your attention in asking 
you to follow me in this statement regarding National Finance. 

Even so, I have only been able to deal with the more important 
problems and those which most effect the general economic status of 
the country. 

There are other problems of notable importance which I cannot 
touch on at this time but which are nevertheless engaging the vigilant_ 
attention of the Ministry of Finance. I would refer more especially | 
to the custom’s régime, of growing importance in all countries which, » 


urged thereto by the needs of ‘the home market, are raising barriers, ~*~ 


I should rather say substantial walls, to protect their respective 
positions. I need only quote as an instance the ad valorem duties 
levied by Great Britain and the United States which exercise an 
almost prohibitive pressure on foreign imports, and the new French 
tariff now being considered which is also a significant document of 
that high protection which characterizes modern Governments, a 
policy which we follow in a very attenuated form, for in our case 
duties are restricted to what is strictly necessary for the protection 
of vital interests of our country. 

I will also refer to the problem raised by earthquakes which is of 
great financial importance and which I have tried to define by closing 
the time for the presentation of further claims. This measure can- 
not be considered unjustified when we bear in mind that nearly twenty 
years have elapsed since the first of these earthquakes occurred, and 
that even in the case of the more recent ones a sufficient number of 
years have gone by to allow of the presentation of documents proving 
the claims advanced by the sufferers. The Government is now 
studying the momentous problem involved in such expenditure so 


[65 ] 


506 


that it may be solved as far as possible, keeping in view two funda- | 
mental points: first, that all the repairs be made which are required | 
for the economic restoration of the districts affected, and secondly, 
that the tax-payer’s money be spent in the interests of those who | 
were really the victims of the disaster. 


land register, a work of high civil and social import involving the 
solution of problems closely connected with the economic and | 
political revival of our Nation. I need only call to mind the possi 
bility of obtaining reliable statistics of agricultural production, | 
the execution of land reclamation works, expropriations for public — 
works, the equitable distribution of credit, and also the equaliza- | 
tion of fiscal burdens, all measures which can only be assured when 
we have a complete register of the whole territory which can be 
made the test in carrying out such great works. 

The attention of the Ministry of Finance is also directed toward | 
the monopolies, and special care is being given to the matter of the 
cultivation of Italian tobacco. Of recent years the tobacco crop has 
become of considerable importance and is exceeding the needs of 
the Monopoly and of our still scanty facilities for export. 

It will therefore be necessary to take measures to reduce gradually 
the production of Italian tobacco so as to avoid the immobilization 
of capital by the accumulation of large stocks of raw material which” 
cannot be utilized, and more especially so that part of the area under 
tobacco,may be placed under crops of greater national importance. 

Finally, leaving minor problems out of account, we must care- 
fully consider the need of developing some State industries, or- 
ganized as joint stock companies, such as the promising Ansaldo- 
-Cogne iron mines and the Italian Petroleum Corporation, whose 
notable achievements have recently been made public. : 

The work entrusted to the Ministry of Finance is, as you see, vast’ 
and complex, but we count on the collaboration of the functionaries 
who are maintaining their splendid tradition of service and to whom 
I send my grateful thanks. 

Inspired by the example set by the Head of the Government we 
are animated by one only desire, that of contributing with all our 
strength and power to the greatness of our beloved Italy which, as_ 
the Prime Minister said, now worthily holds her place in the world 
arena as a great and united Nation. 


[ 66 ] 


507 


TEXT OF THE ITALIAN LABOR CHARTER! 


THE CORPORATIVE STATE AND ITS ORGANIZATION 

Article 1. The Italian nation is an organism whose aim, whose 
life, and whose means of action are superior to those of the single 
individuals occupying and forming it. It is a moral, political, and 
economic unity, which finds its complete expression in the Fascist 
State. aie 

Article 2. Labor in all forms, intellectual, technical, and manual, 
is a social duty? In this sense, and only in this sense, is it under the 
guardianship of the State. The whole body of production is a single 
unit, from the national point of view; its objects are unified and are 
summed up in the well-being of the producers and the development of 
the national strength. 

Article 3. Professional or syndical organization is free. But only 
the syndicate legally recognized and under the control of the State 
has the right legally to represent the entire category of employers or 
workers for which it is constituted: to protect their interests as 
regards the State and other professional associations; to stipulate 
collective contracts of labor binding upon all persons belonging to 
the category, to exact contributions from them, and to carry out in 
relation to them delegated functions of public interest. 

Article 4. In the collective contract of labor the solidarity between 
the various factors of production finds its concrete expression through 
the conciliation of the opposing interests of employers and workers 
and their subordination to the superior interests of production. 

Article 5. The Tribunal of Labor is the organ through which the 
State intervenes to regulate labor controversies, whether with ref- 
erence to the observance of pacts or other existing regulations, or 
with reference to the determination of new labor conditions. 

Article 6. Legally recognized professional associations assure 
legal equality between employers and workmen, maintain discipline 
in production and labor and strive to perfect them. The corpora- 
tions form the sole organization of the forces of production and 

1Reprinted from Current History, Vol. XXVI, No. 3, June, 1927. 


[ 67 J 


508 


represent all their interests. In view of this complete representation 
and of the fact that the interests of production are national interests, 
the corporations are recognized by law as State organs. 


Article 7. The corporative State considers private initiative in 
the field of production as the most efficacious and most useful in- 
strument in the interests of the nation. Private organization of 
production being a function of national interest, the organizer of 
company or undertaking is responsible to the State for the manage 
ment of its production. Collaboration between the productive 
forces entails reciprocal rights and duties between them. The whole 
working staff—technician, general employee, or workman—is an 
active collaborator in the economic undertaking, the direction of 
which lies in the hands of the employer, who has the responsibility 
for it. 


Article 8. Professional associations of employers are obliged to 
promote in every way possible an increase in production, to improve 
it, and to obtain a reduction in costs. The representatives of those 
who follow a liberal profession or an art and the associations depend- 
ing on the State, join in protecting the interests of art, science, and 
letters; in perfecting the processes of production and in ea 


the moral aims of the corporative system. : 


Article 9. Intervention by the State in economic production 
occurs only when private initiative is lacking or is insufficient, or 
when the political interests of the State are involved. Such inter- 
vention can assume the form of control, assistance, or direct manage- 
ment. 


Article 10. In collective controversies with labor legal action 
cannot be begun until the corporative organ has tried conciliation. 
In individual controversies concerning the interpretation and ap- 
plication of labor contracts professional associations have a right te 
intervene for conciliation. Competence in such controversies de- 
volves upon the ordinary magistrature, with the addition of assessors 
named by the interested professional associations. 


Article 11. Professional associations are obliged to regulate 
through collective contracts the relations between the categories of 
employers and employees they represent. The collective labor 
contract is stipulated between first-class associations, under the 
guidance and control of the central organizations, exception being 


[68 ] 


\a 


509 
made of the faculty of substitution on the part of the association of 
higher grade in cases provided for by law and statute. Every col- 
lective labor contract, under penalty of nullification, must contain 
precise regulations on disciplinary matters, on trial periods, on the 
extent and payment of compensation, and on the hours of labor. 


Article 12. The action of the syndicate, the work of conciliation 
‘of the corporative bodies, and the decision of the Tribunal of Labor 
guarantee the approximation of salaries to the normal exigencies of 
life, to the possibilities of production, and to the actual output of 
labor. The determination of salary is not controlled by any general 
'rule and is entrusted to agreements between the parties in collective 
contracts. 

Article 13. The consequences of crises in production and mone- 
‘tary crises should be equally divided among all the factors of pro- 
duction. Statistics collected by the public administrations, by the 
Central Statistical Institute, and by legally recognized professional 
associations regarding the conditions of production, the labor situa- 
tion, the monetary market, and variations in the life of the workers, 
coordinated and elaborated by the Ministry of Corporations, will 
provide a criterion for reconciling the interests of the various cate- 
gories and classes and their interests with the superior interests of 
| production. 

Article 14. When payment is made by piece-work, and the 
liquidation of piece-work is made by periods longer than a fortnight, 
adequate accounts must be made weekly or fortnightly. Night-work 
not included in the regular periodical periods of labor is payable at 
higher rates than day-work. When labor is paid by piece-work, 
‘payment should be determined so that the industrious worker with 
a normal capacity for labor will be able to earn a minimum above 
his basic pay. 

Article 15. Employees have the right to a weekly rest on Sunday. 
Collective contracts will apply this principle, taking into account 
the existing rules and the technical requirements of an undertaking, 
and in view of these will ensure the respect for civil and religious 
holidays according to local traditions. Employees must scrupulously 
observe working hours. 


Article 16. After a year of uninterrupted service in an undertak- 
ing requiring continuous labor, an employee has the right to an 
annual paid holiday. 


[69 ] 


510 / 


Article 17. In undertakings requiring continuous work a labore 
has the right, in case of a breach of contract and in case his discharg 
is not due to his own fault, to an indemnity proportionate to years of 
service. Such indemnity is due also in case of the death of a laborer. 


Article 18. The passing of any undertaking which requires con- 
tinuous work into the hands of another owner does not end the 
labor contract and the personnel preserve their rights under the new 
owner. Similarly the illness of a worker not exceeding a determined 
length does not terminate a labor contract. A call to arms or service 
in the national militia is not a cause of discharge. 


Article 19. Infractions of discipline and acts which disturb the 
normal functioning of a company, committed by workers, are 
punished according to gravity, by a fine, suspension of work, or 
immediate discharge without indemnity. Cases in which these 
penalties are applicable will be specified. 


: 

Article 20. New employees will be subject to a period of trial 
during which the right of ending the contract will be reciprocal, with 
payment only for the time of actual work. 


Article 21. The collective labor contract extends its benefices 
and its discipline to home workers also. Special rules will be issued 
by the State to assure cleanliness and hygienic conditions of home 
work. | 


Article 22. Only the State can investigate and control the 
phenomenon of employment and unemployment of workers, which is 
a complex index to the conditions of production and labor. : 


Article 23. Employment offices organized on the basis of equality 
are placed under the control of the corporative organs. Employers 
must seek help among the workers registered in those offices and they 
have the option of choosing workers who are members of the party 
or of the Fascist Syndicates, depending on the length of time they 
have been registered. 

Article 24. Professional associations of workers are obliged to 
carry out selective action among the workers, intended constantly 
to increase their technical capacity and moral value. 

Article 25. The corporative organs must see that the laws against 
accidents and the policing of labor are observed by individuals 
belonging to the affiliated associations. 


[70 ] : 


511 


_ Article 26. Prevention of accidents is another manifestation of 
_the principle of collaboration toward which employer and employee 
“must proportionately contribute. The State, aided by corporative 
organs and professional associations, will endeavor to coordinate and 
unify, as far as possible, the system and the agencies of accident 
prevention. 


Article 27. The Fascist State proposes to accomplish, first, the 
improvement of accident insurance; second, the betterment and 
extension of maternity insurance; third, the establishment of insur- 
ance against occupational illnesses and tuberculosis and the elabora- 
tion of a system of general insurance against all illness; fourth, the 
improvement of insurance against involuntary unemployment, and 
' fifth, the adoption of special forms of endowment insurance for 
young workers. 

Article 28. It is the task of associations of workers to protect 
the rights of their members administratively and juridically regarding 
accidents and social insurance. In collective contracts of labor, as 
far as technically possible, mutual funds for the sick will be established 
with contributions by employers, employees, and Government 
representatives, these funds to be administered by representatives 
of each under the control of the corporative organs. 


Article 29. Assistance to individuals represented, whether or not 
they are members, is the right and duty of the professional associ- 
ations. These must carry out directly through their own organs 
their functions of assistance. They cannot delegate them to other 
organizations or institutions except for matters of a general nature, 
over and above the specific interests of each category of producers. 


Article 30. Education and instruction, especially professional 
instruction of their representatives, members or not members, is one 
of the principal duties of the professional associations. They must 
support the action of the national organizations with respect to the 
Dopolavoro movement [a nation-wide State organization to provide 
recreation, education, and general beneficent assistance to the 
workers of both sexes after working hours] and other educational 
initiatives. 


512 


BIBLIOGRAPHY : 


Forester, C. S., Victor Emmanuel II and the Union of Italy, ki 
Mead & Co., New York, 1927; price $4.00. 
Fox, Sir Frank, Italy Today, Dodd, Mead & Co., New York, 1927. 


Herford, C. H., The Case of German South Tyrol against Italy, ale 
and Unwin, London, 1927, 96 pp. 

“Italy,” Survey Graphic, March, 1927, with bibliography. 

McGuire, Constantine, Italy's International Economic Position, 
Macmillan Company, New York, 1927; price $3.00. 

Nitti, Francesco, Bolshevism, Fascism and Democracy. Allen and 
Unwin, London, 1927, 223 pp. 

Paleologue, Maurice, Cavour. Translated from the French by Ian 
F. D. Morrow and Muriel M. Morrow, Harper & Bros., New 
York, 1927. (Biography of the statesman of the Italian Risorgi- 
mento.) 

Prezzolini, Giuseppe, Fascism (translated by Kathleen MacMillan), 
E. P. Dutton & Co., New York, 1927, 201 pp.; price $2.50 

Salvemini, Gaetano, The Fascist Dictatorship in Italy, Henry Holt 
& Co., New York, 1927, 319 pp.; price $3.00. 

Sturzo, Luigi, Italy and Fascismo, Harcourt, Brace and Company, 
New York, 1927; price $3.75. 

Vincent, E. R. P., The Italy of the Italians, E. P. Dutton & Co., 
New York, 1927; price $5.00. 


NOTE 


A bibliography of books on Italy will be found on pages 56-61 
of International Conciliation No. 223, October, 1926. For additional 
references on Italy see Literary Digest, April 23, 1927, pages 76-80, 


ie72ell 


LIST OF PUBLICATIONS 


__ International Conciliation appeared under the imprint of the American 

_ Association for International Conciliation, No. 1, April, 1907 to No. 199, June, 
1924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
on to International Conciliation, 405 West 117th Street, New York 

y. 

218. The Institute of Pacific Relations, by J. Merle Davis, General Secretary. 


t March, 1926. 
219. The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 
April, 1926. 
220. Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 


May, 1926. 
221. Treaty-Making Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 


June, 1926. 

222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 

Rappard, H. Wilson Harris and Raymond Leslie Buell. 
September, 1926. 

223. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 

in the Government of Italy. Recent Legislation in Italy. 
October, 1926. 

224. An Alternative Use of Force: When the Earth Trembled, by Richard 

J. Walsh; The Moral Equivalent of War, by William James. 
November, 1926. 

225. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 

Pritchett, Trustee of the Carnegie Endowment for International Peace. 
December, 1926. 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

January, 1927. 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 

Recent Chinese Politics and Diplomacy. 


February, 1927. 

228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bruce, 
Prime Minister of Australia. 

March, 1927. 

229. Locarno and the Balkans: A Turning Point in History, by James T. 

Shotwell; The Possibility of a Balkan Locarno, by David Mitrany. 
April, 1927. 

230. The Interallied Debts. Statements as to the Desirability of an Early 

Revision of Existing Arrangements. 
May, 1927. 

231. The League of Nations: The League of Nations asan Historical Fact, 
by William E. Rappard; The Admission of Germany to the League of 
Nations and Its Probable Significance, by Caleb Perry Patterson. 

} June, 1927. 

232. The Permanent Court of International Justice: The United States and 
the Permanent Court of International Justice, by Quincy Wright; 
Sidelights on the Permanent Court of International Justice, by Ake 
Hammarskjold. 

September, 1927. ees 

233. The Genesis of the Universal Postal Union. A Study in the Beginnings 
of International Organization, by John F. Sly. 

October, 1927. 

234. Italy’s Financial Policy, as outlined by Count Giuseppe Volpi of Misurata, 
Minister of Finance in the Government of Italy. Text of the Italian 
Labor Charter. 

November, 1927. 


INTERNATIONAL CONCILIATION 


Published monthly, except July and August, by the 
Carnegie Endowment for International Peace 


Entered as second-class matter September 15, 1924, at the post office at 
Worcester, Massachusetts, under the Act of March 3, 1870. 


AUSTRALIAN IMMIGRATION POLICY 
By 
A. H. CHARTERIS 


Challis Professor of International Law, 
University of Sydney, New South Wales 


DECEMBER, 1927 


No. 235 


CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 
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Executive Committee 


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INTERNATIONAL PEACE 


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Drrector, NicHoLaAs Murray BUTLER 


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; TSUNEJIRO MrvaoKa, Tokyo, Japan 


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Moritz J. Bonn, Germany GILBERT MurRAyY, Great Britain 
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CONTENTS 


| 'REFACE . 
| NTRODUCTORY 


\EGATIVE ASPECT—ASIATIC EXCLUSION 
HISTORICAL . ; 

Chinese Influx ieee Jos 

Restrictive Measures : 
Anti-Chinese Measures An eeeay 

The Dictation Test 

Immigration Act, 1901 . : 
Exemption by ‘‘Gentlemen’s Werecmenis 
Immigration (Amendment) Act, 1925 


POLITICAL AND SOCIAL . : 
Premier Griffith’s Argument, 1885 : 
Modern Grounds of Approval . 


Positive ASPECT—PROMOTION OF WHITE SETTLEMENT 
i 


_ COOPERATION WITH IMPERIAL GOVERNMENT 


Assisted Passages 


COMMONWEALTH LEGISLATION, 1926 
Development and Migration Act : 
Northern Territory (Administration) Act, 1926 


. 
H 


‘APPENDICES 


APPENDIX A 


Method of Baslyide Diewuon Test 


Judicial Interpretation of ‘Immigration’ and “Immi- 


grant”’ 
APPENDIX B 


Legal Teabiliees of Buitish tans Dondaleds in user ey 


Numerical Limitation on Admission of Certain Aliens 


Page 


37 


debi. 


515 


PREFACE 


Th s article which deals with the problem of Australian immigra- 
ion has been prepared for the International Conciliation Series of 
ments by Professor A. H. Charteris, Challis Professor of Inter- 
onal Law, University of Sydney, New South Wales. Professor 
eris is also Examiner in Law in the University of New Zealand, 
contributed articles to various British law journals, and has made 
orough study of the conditions and motives governing Australia’s 
igration policy. 

NicHoLas Murray BUTLER 

w York, October 27, 1927. 


517 


AUSTRALIAN IMMIGRATION POLICY 
By 
A. H. CHARTERIS 


INTRODUCTORY 


Like other countries bordering the Pacific and inhabited by the 
| White race, Australia, in the economic and racial interests of her 


/indeed of suppressing—the immigration of coloured labourers and 
artisans, though not of coloured merchants, students, and tourists 
'who may wish to visit the continent. 

Applied to an area approximately equal to that of the United 

'States,! by a population of a little over 6 millions,? this restrictive 

'policy, which would excite no comment if confined to say—the island 

of Tasmania, calls for explanation in view of the growing interna- 

| tional importance of migration problems. The purpose of the present 

‘Paper is to give an account of the general immigration policy, of 

which the “White Australia” policy is but the negative aspect, 

indicating, on the one hand, the origin and method of enforcement 
of Asiatic exclusion, as well as the national reasons therefor, and, 

On the other, recent governmental efforts to stimulate and prepare 

for the flow of migrants from Great Britain to Australia. 

_ The reproach of extending the policy of exclusion over an area 
unreasonably large loses most of its force in the light of well-estab- 
lished facts. Vast as the area of Australia is, both her ‘“‘open spaces” 
and her ‘“‘limitless possibilities’ greatly shrink for the student of 
settlement, who realises that of this area’ not less than one million 
square miles, or 34 per cent, is in the geographer’s sense “‘desert,” 

12,074,581 square miles. 
2 As at December 31, 1926, 6, r10, 514, being an increase of 118, 430 during the preceding 

I2 months, the average rate of ‘annual increase being slightly more than 2 per cent. (Fig- 


Agel compiled yy the Commonwealth Statistician and published in the Australian press, 
A 14, 1927. 

According to the Census of 1921, the total foreign population of Australia was 45,754, 
including among full-blood non-Europeans 28,087 Asiatics, of whom 17,157 were Chinese, 
absr Hindus, 2740 Japanese, and 1087 Malays. (Commonwealth Year-book, 1926, p. 881). 

+The maps were prepared by Professor Griffith Taylor of Sydney University for his 
paper on the Resources of Australia. The present writer has been allowed to use them by 
the Institute of Pacific Relations, Honolulu. 


[9] 


518 


HABITABILITY 


Mia 
20” Rain, 


20 


30: 


100 200 300 400 500 
3 
V0 120 130 140 THE GEOGR. REVIEW, JA 


Fic. 1. A generalised habitability map of Australia. The numbers show approximate valu 
land in descending order from rt to 8. There are few sheep or cattle in 6 & 7, and none in 8. Q 
Geographical Review, Jan., 1926.) 


i.e. ‘‘good pastoral lands but useless for agriculture,” while the area 
fairly suitable, in point of climate, for agriculture is 24 per cent, 
716,000 square miles, of which about one quarter is too rugged 
for close settlement. The area actually under agriculture, however, 
is only 17 million acres, or about 26,000 square miles. The com- 
parison so often made with roughly corresponding area of the United 
States is extremely misleading, as the diagrams in the upper part of 
Fig. 2 more plainly show. 

Nor relatively to area available for human settlement does the 
present Australian population of just over 6 millions fall unrea- 
sonably short of the maximum which is estimated to be possible 
without lowering the present standard of living. Two distinguished 
geographers, Australian and American, agree in estimating this 


[10 ] 


FROM PROCEEDINGS INSTITUTE OF 
PACIFIC RELATIONS, HONOLULU, SESSION 1927 


| Fic. 2. Empty and occupied Australia, separated by a line passing near Geraldton (G.) 
Broken Hill (B.) and Camooweal (C.). Only about 20,000 people out of six million live in the 
orthwest half. Rain regions are indicated in general fashion. Wheat belt shown by dots. 
[n the circular diagrams Desert, Pasture, Rugged and Agricultural lands are compared. 


maximum at 20 millions. Professor Griffith Taylor, whose classi- 
fication of Australian lands is summarised above,* estimates the 
capacity of Australia to support population at 9 per cent of the 
population of the United States and Canada, 7.e. about Io or If 
millions under present conditions, and about 20 millions if the 
United States approaches its possible maximum of 200 millions. 
By the different method of estimating the capacity of the Australian 
area if utilised as fully as the corresponding areas of the United 
States, Professor Ellsworth Huntington of Yale considers that the 
Australian maximum is not likely to go much beyond 20 millions 
4 Geographical Review, Vol. X, XII, 1922, pp. 375-402. 


a 


520 


“unless some new and unsuspected discoveries are made or 
standards of living are materially lowered.’ 

Again, density of population, which for the whole of Australia 
but 2.02 per square mile—the lowest recorded for any country— 
is no index to the effective economic use of which the utilisabl 
two-thirds of this area is capable. Of the most remunerative of thes 
uses, relative density of population is neither a condition nor a like 
result. Under Australian conditions, the growing of wheat whicl 


200,000 square miles, requires a minimum of human labour and 
seldom the cause of closer settlement. In view of present h 
prices of wool there is even warrant for growing wool on land which 
is suitable for growing wheat. | 
Moreover, as was pointed out by an able Australian writer som 
years ago, it is open to doubt whether the remarkable developmen 
of Australia from what was a desert before the arrival of the whi 
race in 1788 to its position as source of wool, wheat, and corn for t 
peoples of Europe, would have been greatly accelerated by “‘quanti- 
ties of cheap Asiatic labour.’’6 : 
These considerations are submitted as relevant to the criticism 
that the disparity of area and population creates for Australia a 
problem which makes her restrictive immigration policy tend to 
intensify. . 


NEGATIVE ASPECT—ASIATIC EXCLUSION 


Historical 


The negative aspect of Australian immigration policy is to be 
explained by the origin and course of Australian colonisation. This 
began as a governmental process in 1788 and may itself be said to 


5 See West of the Pactfic, 1925, pp. 392-7. 

It is only fair to mention that this estimate is not universally accepted. Statisticians 
who regard food-production as the controlling factor in capacity of a country to carry popu- 
lation, point out that in the six years 1916-1921 the food production in Australia sufficed to 
maintain 9 millions of people in Australia and foreign countries, all of whom could have 
been employed in Australia had her natural resources been sufficiently developed. As her 
resources in coal alone are nearly as great as those of the United Kingdom and much more 
accessible owing to greater width of seam, statisticians are not disposed to accept so low a 
limit as 20 millions for her potential employable population. Her food resources they 
regard as capable of the requisite expansion. (Cf. The National Diet by D. T. Sawkins, 
M.A., F.S.S., Statistician to N.S.W. Board of Trade, Sydney.) (Government Printer, 
Sydney, 1922.) This argument is strongly used by those who see in the development of 
secondary production the main means of increasing rapidly the population of Australia. 

6 See The Round Table, No. 42, March 1921, pp. 312, 214-5. Primarily intended to 
demonstrate that the national policy of Australia is a vital interest of the British Empire, 
this article is the ablest recent statement of the case for ‘‘White Australia.” 


[12] 


521 


e a direct consequence of the American War of Independence which 
Interrupted, and finally put an end to, the transportation of con- 
ficts from Great Britain to the American Colonies. In 1788, then, 
che British Government established a penal settlement at Sydney 
[Cove near Botany Bay, which Captain Cook, coming from the 
pastward, had discovered in 1770. From the first the white popula- 
ion thus introduced into Australia has consisted, with few excep- 
tions, of men of one race. Great Britain was the source not only 
pf the convicts but also of the free settlers whose numbers in New 
South Wales and in other later settlements were increased after the 
Peace of 1815 by ex-officers, as they would now be termed, of the 
ritish army and navy.” 

With Eastern countries there was in the early days little inter- 
ourse except for sporadic attempts by pastoralists (or ranchers) 
o recruit Asiatic labour under indenture. 

The first great increase of population followed the discovery of 
pold® in New South Wales and Victoria in 1851 which grins 
added half a million inhabitants during the period 1852-1862 
1852-1862. Among the newcomers were many Chinese whose 
presence in the gold fields in competition with Europeans speedily 
caused race friction, which did not stop short of organised attempts 
to drive the Asiatics off the fields by force. To meet this new social 
evil three of the Australian States: Victoria, South Restrictive 
Australia, and New South Wales in succession passed Measures 
measures in 1855, 1858, 1861 respectively restricting the immigration 
of Chinese and increasing the taxation on those already in the country 
in order to provide for the increased protection which they required. 
The methods adopted were to limit the permissible number of im- 
migrants to one for every ten tons of the carrying ship’s burden, and 
the imposition of a poll tax of £10. When the number of Chinese 
in Australia declined with the fall in yield from the gold fields, these 

7 New settlements were made in Van Diemen’s Land (Tasmania) in 1803, King George’s 
Sound (Adelaide) in 1827, and at Swan River (Western Australia) in 1829, British authority 
being extended over the whole of Australia for the first time in that year. The Colony of 
South Australia was founded in 1834 at the instance of Edward Gibbon Wakefield who 
obtained parliamentary sanction for carrying out his scheme of scientific colonisation. 
Victoria and Queensland were out-settlements from New South Wales from which they were 
Separated in 1850 and 18509 respectively. The six colonies were federated in 1900 in virtue 
of the Commonwealth of Australia Constitution Act of the Imperial Parliament (63 & 64 
Vic. c. 12). The opening of the Federal Parliament at Canberra, the Federal capital, by 
H. R. H. The Duke of York took place on May II, 1927- 

8 Of alluvial gold at Lewis Pond’s Creek, N. S. W. on February 12, 1851 and at Ander- 


son’s Creek near Melbourne, Victoria, in August 1851. (See Jenks, History of the Austral- 
asian Colonies, (1893) Chap. X). 


L332 


522 


temporary measures were repealed by South Australia in 1861, by 
Victoria in 1865, and by New South Wales in 1867. But the problei ' 
of Chinese immigration recurred in 1875 with the discovery of im 
portant gold mines in Queensland where it was dealt with by 
legislature in 1875 on the Victorian precedent of 1855. 

If resistance to the presence of Chinese in Australia had originated 
with European miners, public opinion began in the seventies to 
harden against Asiatics under the growing influence of trade-uniom 
which, in order to maintain the standard of living, consisten ly 
opposed both indentured labour (as practiced in Queensland) andl 
the free admission of Asiatics. Apprehension as to the effect onl 
Australia of the agitation for the exclusion of Chinese from the 
Anti-Chinese Pacific Coast, culminating in the Chinese Exclusion Act 
1882-1807 of 1882, led to a revival of anti-Chinese legislation in| 
all the Australian States. By 1887 all of them had fallen into line, 
imposing, as in the sixties, a poll tax of £10 and limiting the number 
of immigrants by the tonnage of the carrying vessel. International 
as well as inter-Empire complications ensued. When news arrived 
that the Chinese Minister in London had made representations 
against this legislation on the ground of conflict with the Treaty o} 
Peking 1860, large numbers of Chinese were said to be on their wa 
to the Northern Territory attracted by reports of new ruby mines. 
Australian public opinion took fright, and compelled first the Victo- 
rian and then the New South Wales Executive to act drasticallg 
The master of a British vessel ‘‘The Afghan,” which put into Mel- 
bourne in May carrying Chinese passengers in excess of the numba 
permitted by the local statute, was allowed the alternative of landing 
his passengers under heavy fine, or taking them to sea again. He 
chose the latter alternative and made for Sydney, where another 
vessel, also carrying Chinese in excess of its legal quota, was a 
in harbour. 

By executive act the Premier refused the immigrants permission 
to land, excepting those holding naturalisation papers showing pre- 
vious domicile. A writ of habeas corpus was obtained and the 
Supreme Court of New South Wales found them entitled to land 
and refused leave to appeal to the Privy Council. In Victoria, how- 
ever, legal proceedings in somewhat similar circumstances led to the 
well-known decision of the Privy Council in Musgrove v. Chun 


C14] 


523 


‘cong Toy® in which it was held that an alien has no legal rights 
enforceable by action to enter British territory. This decision 
sufficed to make the existing restriction acts thoroughly effective 
as regards Chinese. 

' It was inter-imperial complications which led to Australian 


adoption of the dictation test at the instance of the ae nee 
‘Imperial authorities in 1897. With British India as well Test 


‘as Japan complications had threatened to attend the endeavour of 
‘three of the Australian Colonies in 1890 to apply to all Asiatics the 
provisions of the Chinese exclusion acts; they were avoided by the 
vigorous intervention of Mr. Joseph Chamberlain, as Secretary of 
State for the Colonies, at the Colonial Conference in London in the 
‘following year. The presence in Australia of Asiatics other than 
'Chinese—notably of British Indians numbering 1800 out of some 
2500 non-Chinese Asiatics—had begun to attract attention shortly 
before the Inter-Colonial Conference of Premiers met in Sydney in 
1896 to consider whether the Colonies should seek adherence to the 
recent Anglo-Japanese treaty of commerce and navigation of 1884.1 
Probably scenting danger in the Japanese victory over China in the 
war of 1894, the Conference decided to take no action in regard to 
the treaty, as adherence would give the right of entry to Japanese, 
and, in view of the presence of British Indians, to extend to all 
Asiatics the provisions of the Chinese exclusion acts which specified 
race or colour. Queensland alone dissented (Japanese labourers 
having recently been imported by the sugar planters in North 
Queensland), and in 1897 became a party to the treaty™ under a 
provision which reserved to the colony the right to restrict the 
immigration of artisans and labourers. Shortly afterwards Queens- 
land, to ensure that labourers and artisans should not come into 
that State, made an agreement with Japan which is of particular 
interest as the forerunner of the ‘‘Gentlemen’s Agreements”’ with 


9L. R. 1891 A. C. 272 (cf. r Pitt Cobbett: Leading Cases on International Law, 204, 
Scott's Cases on International Law. Musgrove, the Collector of Customs of Victoria, was 
sued by Chun Teong Toy, a Chinese immigrant, for having prevented the latter from 
landing, this having been done under executive order of the Government of the Colony of 
Victoria. On complainant’s behalf it was contended that his exclusion was illegal both on 
a proper construction of the Chinese Exclusion Acts in force in that colony and at common 
law. The Supreme Court of Victoria found in complainant’s favour. The Privy Council 
on appeal, after reversing the judgment on the question of interpretation of the statutes, 
further held that an alien has under the general law no legal right, enforceable by action, 
to enter British territory. 

10 See 19 Hertslet’s Commercial Treaties, 691. 

1 See op. cit. p. 699. Queensland made an agreement with Japan to regulate the immi- 
gration of Japanese which became binding on the Commonwealth and remained in force 
until 1902, The Anglo-Japanese treaty of 1894 was denounced by Japan in 1910, 


[15] 


i 
i 
i 
i 


524 


the Commonwealth,” Canada, and with the United States of 1907} 
Bills on the lines agreed on were at once introduced in New South 
Wales, Tasmania, and New Zealand, but to all of them the Roya 
Assent was reserved in view of the double danger of offending British 
Indian sentiment and of injuring good relations with Japan (whi of 
were to ripen into the Anglo-Japanese Alliance of 1902). The Japas 
nese Government, moreover, had strongly protested against the bills 
in question and had declared itself ready to negotiate a treaty restric 
tion of Japanese immigration into colonies on the model of the 
arrangement with Queensland. 
At the Colonial Conference’ in London in the following year Mr) 
Chamberlain expounded to the assembled Premiers both sets of ob- 
jections to the bills and this with unusual frankness and vigour.4 
He expressed the sympathy of the British Government 
with the determination of the White inhabitants of these colo- 
nies, who are in comparatively close proximity to millions and 
hundreds of millions of Asiatics, that there shall not be an 
influx of people, alien in civilisation, alien in religion, in cus- 
toms—whose influx, moreover, would most seriously interfere 
with the legitimate rights of the existing labour population.% 


i 
* 


But he invited the Colonial Premiers to consider whether they 
could not achieve their purpose by a method less objectionable than 
the exclusion of immigrants on the ground of colour or race. In 
order to spare the susceptibilities of the 300 million Indian subjects 
of the Crown, as well as of foreign Asiatics, he urged the Premiers 
to adopt the principle of the recent Natal Act No. 1 of 1897, which, 
in addition to prohibiting certain specified classes of immigrant 
(paupers, idiots, diseased persons, prostitutes, and criminals) de- 
clared generally that any person who, when asked to do so, failed to 
write out and sign in a European language an application for ad- 
mission on a prescribed form set out in a schedule to the Act was to 
be deemed to be a prohibited immigrant. 

The Royal assent had been given to the Natal Act, and New South 
Wales, Western Australia, and Tasmania readily adopted this non- 
discriminatory model, the more so as it was acceptable to the Japanese 
Government. 

12 See p. 17 infra. 

13 These Se wee the first of which was held in London in Taare changed their name 
from ‘‘Colonial”’ ‘‘Imperial’’ Conferences in 1911. They are held at intervals of three 
years, the last ee the Conference of October-November, 1926. [See International 
Conciliation No. 228, March 1927.] 


14 See Keith’s Responsible Government in Dominions, Vol. 2, p. 1080. 
15 See Keith: op. cit. p. 1081, 
[16 ] 


525 


_ After the Federation of the Australian Colonies in 1900, the method 
sf exclusion to be adopted came before the first Federal Parliament, 
hich had approved by a large majority the general principle of 
Asiatic exclusion. The British Government having renewed its 
‘epresentations, the Parliament, after much controversy, adopted 
the language test, but in order to avoid the risk of evasion of the 
test as applied in Natal (e.g. through the production of a forged 
application) the language test was couched in the form of a dictation 
test. The Federal Immigration Restriction Act 1901 (No. 17), accord- 
ingly, prohibits the entry into Australia of (inter alios) tmmigration 
any person who, when asked to do so, fails to write out Acksagpr 
on dictation and in the presence of an officer a passage of 50 words 
in length in a European language. 

In view of representations by the Japanese Government that an 
education test in any European language was in effect discriminatory 
‘against Japanese, who were thus placed in a position of inferiority, 
par. (a) of s. 3 was amended in 1905" to read: 


Any person who fails to pass the dictation test: that is to say 
who, when an officer or person duly authorised in writing by an 
officer, dictates to him not lessthan fifty words in any prescribed 
language, fails to write them out in that language in the presence 
of that officer or authorised person. 


No regulation prescribing any language or languages were issued 
under the Amending Act, and the provisions of the Exe 
original Act remained de facto in force. Thereason for Agreements 
non-user of the new powers appears to have been that the objection 
of the Japanese Government had been met by an informal arrange- 
ment made with the Australian Government in 1904 whereby bona 
‘fide students, merchants (engaged in oversea trade), and visitors 
from Japan were permitted to enter the Commonwealth for a stay 
of 12 months without liability to the dictation test on passports 
issued by the Japanese authorities and viséed by the British Consul 
at the port of embarkation. As from April 1919 the permit may be 
extended beyond 12 months on application for a certificate of exemp- 
tion. A similar arrangement was made in the same year with the 
18 By the Immigration Restriction (Amendment) Act 1905 s. 4 which further provided 
that no regulation prescribing any language or languages should have any force until it had 
been laid before both Houses of Parliament, and, before or after the expiration of such 
thirty days, both Houses of Parliament, by a resolution, of which notice has been given, 
had agreed to such regulation. Section 5, moreover, provided that until a regulation pre- 
scribing any language or languages under Sec. 3 of the Principal Act, as amended in the 
Act of 1905, should come into force, any language authorised by this said Sec. 3 before 


the commencement of the Amending Act should be deemed to be a prescribed language 
within the meaning of that section as amended. 


ey 


526 


status. The Amending Act of 1905 legalised these arrangements i iJ 
their original form and authorised the conclusion of others of tt 
same nature (s. 8). Special arrangements made in 1912 and modified 
in 1920 regulate in the same manner, the admission and sojourn | 
Chinese students, merchants, and tourists. Similar arrangements 
moreover, apply to individuals of the specified classes from th 
British possessions of Ceylon, Burma, Hong Kong, and Strait 
Settlements, as well as from Annam, Egypt, the Philippine and 
Hawaiian Islands.” Their importance lies, of course, in the fac 
that though terminable without notice, these arrangements signify 
the acquiescence, during their currency, of the foreign governments 
concerned in the application of the dictation test to all persons nof 
falling within any of the exempted classes. 

While the unconcealed aim of the Australian Parliament was the 
exclusion of Asiatic labourers, it must be emphasised that the in- 
direct method of achieving this result had been forced upon an un- 
willing Parliament by the British Government for diplomatic rea- 
sons in order to avoid hurting the feelings of friendly nations. B 
many in Australia the device was denounced as an immoral sub- 
terfuge. Nevertheless the statute, while entirely non-discriminatory 
in form, offered the great advantage of a flexible test which could 
be applied to secure exclusion in any given case, since it is not diffi- 
cult in practice to discover from a suspected migrant the languages 
which he knows, and to apply the dictation test in one which he is 
certain not to understand. Difficulty has occasionally arisen in 
regard to undesirables of unusual linguistic attainments. In one 
such recent case concerning an international rogue, recourse was 
had to Gaelic which the Court of New South Wales confidently held 
to be a European language within the meaning of the Act. In 
official practice a European language means a living European 
language.1® 

17 For further details see Mr. E. L. Piesse’s article: ‘‘Australia and Japan”’ in Foreign 
Affairs (New York), 1926, p. 475 where the genesis, dates, and other particulars of these 
arrangements are, it is believed, published for the first time. Their existence appears to 
have been unknown to Professor A. T. Toynbee whose admirable article on “‘Asiatic Mi- 
gration’’ in Survey of Foreign Affairs, 1924 (Oxford, 1926) does not allude to them. 

18 The ‘“‘Sun’’ Newspaper, Sydney, August 23, 1921. 

19 For method of applying the Dictation Test see Appendix A. It may be mentioned 
here that in the year ending December 31, 1926 the number of persons excluded from 
Australia under the dictation test was only 34. This comprises 4 British subjects, 22 


Chinese, 7 Papuans, and 1 Hawaiian. The inference is that the test operates as a “stand-off 
signal’’ and that occasion for its use is infrequent. 


[18 ] 


927 


It should be added that under the Immigration Act, 1901-25, 
jec. 4B, any person who has resided in Australia for a period or 
yeriods in the aggregate of not less than five years and is about to 
leave the Commonwealth may apply for the issue of a certificate 
which, if issued, will exempt him from the dictation test on his re- 
furn, provided that this occurs within the specified period and that 
jae produces and delivers the certificate to an officer. In 1925, 2538 
atics were admitted to the Commonwealth without the dictation 
fest, being exempted either under these certificates or the agree- 
| Until 1925 the only departure made by the Australian Parliament 
rom the non-discriminatory (or anonymous) method Immigration 
ine - < “5 5 (Amendment) 
bf immigration restriction was to be found in a post-war Act 1925 
measure of exclusion of ex-enemy aliens, which was embodied in the 
Immigration Restriction (Amendment) Act, 1919. This act provided 
tthat from December 2, 1920, and thereafter until the Governor- 
(General by proclamation otherwise determined, the term “prohib- 
ited immigrant”’ included any person who, in the opinion of an 
immigration officer, was of German, Austro-German, Bulgarian, or 
Hungarian parentage and nationality or was a Turk of Ottoman 
tace.2° Except as regards Turks of Ottoman race, the ban on the 
immigration of ex-enemy aliens was raised as from December 2, 
1925.74 
_ Later in the same year, however, an important innovation on the 
‘Commonwealth’s traditional policy of refraining from specifically 
‘excluding individuals of a named race or nationality was unobtru- 
sively made in the Immigration (Amendment) Act 1925. In view of 
the considerable increase in the number of immigrants from coun- 
tries in Southeastern Europe, which had immediately followed the 
entry into force of the United States’ Immigration Act of July 1, 
1924, clamour for increased restriction had arisen in the Australian 
press and Parliament. The Government was urged to adopt on the 
United States’ model a quota system, designed to prevent what was 
somewhat extravagantly described as the “influx” of undesirables. 

% Semble, under the double test of parentage and nationality a natural-born British 
subject of British parentage who had acquired ex-enemy nationality by naturalisation or 
Marriage would not be a “prohibited immigrant" within the meaning of this section. Brit~- 
ish-born women who had become nationals of any of the first four ex-enemy States by mar- 
Tiage were, doubtless, primarily in contemplation of the legislature. 

21 By proclamation of the Governor-General of December 3, 1925 providing that the 
provisions of par. (g.e.) of s. 3 of Immigration Act 1901-25 were declared not to apply to 


persons of German, Austro-German, Bulgarian, or Hungarian parentage and nationality 
on and after December 2, 1925 (Commonwealth Gazette No. 103 of December 3, 1925). 


[19] 


528 


The Government rejected these proposals on the double grou 1 
of the expense involved in establishing an immigration service fol 
the Commonwealth in Europe and of the impolicy of giving possib] | 
ground of offense to foreign States. Nevertheless the latter objec} 
tion applies to one at least of the three statutory grounds of exclu 
sion which Parliament in fact adopted, with the omission of certait 
important qualifying words, from the Canadian Immigration Ad 


1919. 
Sec. 3 of the Amending Act of 1925 adds the following provisior 
to the Immigration Act 1901-24: \ 


3K (1) The Governor-General may by proclamation prohibit, | 
either wholly or in excess of specified numerical limits and either 
permanently or for a specified period, the immigration into the 
Commonwealth or the landing at any specified port or place in © 
the Commonwealth, of aliens of any specified nationality, race, 
Sie or occupation, in any case where he deems it desirable to 
0 SO, 
(a) on account of the economic, industrial, or other conditions 
existing in the Commonwealth; 
(b) because the persons specified in the proclamation are in his 
opinion unsuitable for admission into the Commonwealth; or 
(c) because they are deemed unlikely to become readily as- — 
similated or to assume the duties and responsibilities of 
Australian citizenship within a reasonable time after their — 
entry. 
(2) Any person who enters the Commonwealth in contraven- | 
tion of the prohibition contained. 


The powers conferred by this Act have not so far been exercised. 
The three statutory grounds are, of course, additional to the existing 
grounds of exclusion, from which they differ in not relating to the 
personal qualities or attainments of the individual immigrant. 
Ground (a) is’ unobjectionable, relating as it does to the internal 
conditions of Australia. Grounds (b) and (c), however, may well 
cause international unpleasantness, if cited in their statutory bald- 
ness as justifying the exclusion of persons of a specified nationality 
or race. Doubtless the sting may be taken out of a possible affront 
by the addition of qualifying words like those in the Canadian 
statute.” 

2 The Canadian Immigration Act 1919 (9 & 10) Geo. V. c, 25 by s. 13 repeals paragraph 
(c) of s. 38 of the Canadian Immigration Act 1910 and substitutes a paragraph on which 
the Australian provision is modelled (with better draftsmanship). The Canadian ground 


of “‘unsuitableness”’ (corresponding to (b) in the Australian Act) is qualified by the words: 
“having regard to the climatic, industrial, social, educational, labour, and other conditions 


[20] 


529 


Meanwhile and independently of these statutory powers the 
‘Australian Government, in order to prevent an undue —— Numerical 
influx of immigrants excluded from the United States Jenvtaremice 
by operation of United States’ Immigration Act of July Certain Aliens 
I, 1924, effected, through the British diplomatic agents, arrangements 
}with the governments of Italy, Greece, Jugo-Slavia, and Albania 
‘and other countries in Southeastern Europe for limiting the number 
of passports to be issued in such countries with visa entitling the 
holders to travel to Australia. By Regulation of December 1924 


per month for each of the six Australian States or 1440 per annum: 
| and of Jugo-Slavians, Greeks, and Albanians to 100 per month for 
each nationality. The arrangement with the Italian Government is 
| that the latter undertakes not to issue passports with visa for travel 
'to Australia except to migrants who can show that they possess at 
} least £40 or its equivalent, or that some resident in Australia will be 


' tion in alien European immigration to Australia has been effected. 


Political and Sociai 


While the reasons advanced for Australian immigration restriction 


have been varied in form from time to time,™ there has Pies 
been no change in the fundamental political reason. Argument 1885 
Apart from all questions of relative merits of competing civilisations, 
which are no longer stressed, the political difficulty for a white demo- 


: cracy of accommodating an alien race within its body without damage 
_ or requirements of Canada” (omitted from the Australian Act) and the ground of “‘unde- 
 sirability”’ is qualified by the words (also omitted in the latter): “‘owing to their peculiar 
customs, habits, modes of life, and methods of holding property.” The persons against 
whom the latter provision was aimed are understood to have been certain sects of peculiar 
people of the Doukebor, Hutterite, and Mennonite class, who had already given trouble in 
da by segregating themselves in prairie communities and holding themselves aloof 
from everything Canadian—even rates and taxes. By Order in Council made after the 
passing of the Act, persons of these three classes were denied admission to Canada. 
es For the period 1922-26 the admission of Europeans without the dictation test was as 
OWS: 


1922 1923 1924 1925 1926 
British 84,263 85,440 88,335 82,662 90,562 
talians 3,367 1,739 4,540 6,102 3,952 
Greeks 472 922 2,028 645 683 


Cther Europeans 339 587 2,735 1,397 8,356 

(See Quarterly Summary of Australian Statistics, Bulletin No. 106, December 1926.) 

24 See in particular ‘‘White Australia” in The Round Table, No. 106, March 1921, pp. 
312-338 (the ablest argument for the policy as a vital interest of the British Empire); 
“The White Australia Policy’’ by Sydney in Foreign Affairs (New York) Vol. 4, p. 97 
(z925); ‘Australia and Japan” by E. L. Piesse, op. cit., p. 475. For a fuller sympathetic 
discussion by non-Australians, see Professor J. W. Gregory’s The Menace of Colour (1925), 
Chaps. VII-IX, and Professor Ellsworth Huntington’s West of the Pacific, Chaps. 
XIV-XIX. 

[21] 


530 


to democratic institutions has never been absent from Australia: 
political thinking. Nor has it ever been more powerfully urged thai 
in the eighties by Mr. (afterwards, Sir) Samuel Griffith when dealing 
in a dispatch to the Governor for transmission to London, with th 
special case of coolie labour under indenture. Discounting certaiz 
allusions to “inferior” and “superior’’ races, Australian opinion, it is 
conceived, would now approve as still valid the part of his argumen 
which is summarised as follows this now little known dispatch :* 
(1) It is undesirable to introduce into a white democracy an alien} 
race under conditions denying to it any share of political power and 
requiring protection by a paternal government. 
(2) It is undesirable to permit free economic competition between 
Asiatics and Europeans since it invariably degrades manual labour 
in the eyes of the latter. 
(3) If coloured labour were necessary in Australia (which he was 
not prepared to admit) the only practical course was to assign 
separate areas in which coolies might be admitted “but with the 
full understanding that as to them the hope of civilisation on the 
European model is abandoned.” 
(4) The administration of such areas ought, he urged, not to be 
entrusted either (a) to a representative government in which (as in 
1885) the interests of employers predominated and which, in his 
opinion, was unfit to control ‘‘inferior’”’ races, or (b) to a constitu-— 
tional government representing the whole white population, since 
this was ‘‘not the best to control the destinies of an alien race en- 
tering into competition with them in various forms of industry.” 
(5) But only if clearly unfit for European settlement, should such 
areas in Australia be thrown open to Asiatic immigration, and then - 
only when ‘constituted as a separate territory governed as a Crown 
Colony by Imperial officers who will act with impartial justice be-— 
tween inferior and superior races.” Difficult as the problem of deter- 
mining such areas under these conditions would be, it would be as | 
nothing compared to the social and political troubles inevitably in- 


25 See ‘Correspondence on the subject of Separation of the Northern Portion of Queens- 
land ordered by Legislative Assembly of Queensland to be printed, October 23, 1885." 
(Catalogue number in Mitchell Library, Sydney: 9. 342.94.0. — i | 

% This proposition seems now to require modification in view of South African ex- 
perience. It is not so much that manual labour is degraded in the eyes of Europeans as 
that Europeans cannot undertake manual labour except at the wages of coloured labour 
which are insufficient to support the Europeans’ standard of living. Two standards of 
living are thus created with an intervening gap which may of course be bridged by indi- 
vidual rises from the lower and falls from the higher. i 

27 A similar proposal was recently made for the development of the Northern Territory 
of Australia without receiving public support. 


[22°] 


531 


ved in any attempt to unite the Asiatic and European civilisa- 
ns in a constitutional colony. 

(6) Finally, the long view, which has always appealed to Australian 
pinion, was stated thus: 


The permanent advantages that would result to Australia and 
the Empire at large from preserving Queensland as a future 
| field for European settlement appear to me so greatly to out- 
| weigh the present gain that would ensue to a few persons—of 
} much enterprise no doubt, but who have no intention of making 
Queensland their home, regarding it rather as a field for exploi- 
tation—that until the experiment of European Settlement has 
been tried and failed, I hold that it would bea most fatal mistake 
to adopt the opposite policy, the consequences of which would 
be probably irreparable. 


iy 


The European experiment has since been tried and has not failed. 
But the price has proved high.* 
Among the Australian public support for the continued exclusion 


of non-European labourers seems now-a-days to rest Peters 3 
. . . ° 
upon the following considerations: Approval 


(1) Once admitted to residence in Australia the claim of such 
persons to the franchise could not be denied in a democratically 
governed country. But the grant of the franchise would introduce 
‘into Australian politics a factor which, it is conceived, might prove 
fincalculable. It might well threaten from within the elaborate 
‘structure of compulsory regulation of wages and working conditions 
in primary and secondary industries alike, which organised labour 
has succeeded by political action in building up in the lee of a high 

protective tariff. Tariff and industrial legislation in combination 
have brought about a high wage for unskilled labour and working 
conditions for labour in general which are much in advance of the 


% In a vigorous reply, which demolished many of Mr. Griffith's “‘facts,”’ the planters 
denounced his proposed experiment of growing sugar in tropical Queensland as impossible. 
Vet eventually the use of coloured labour in the cane fields ceased in 1906 and by dint of a 
heavy duty on foreign sugar and a bounty on sugar grown in Australia by white labour 
only, it proved possible for Queensland to grow by white labour all the sugar needed in the 
Commonwealth. The bounty, which amounted to £1,060,681 between 1902-9, was dis- 
continued in 1913. By 1920-1 the acreage under cane cultivation stood at 162,619, the 
production of canes at T. 1,339,455 and of sugar at T. 167,401. The corresponding figures 
in 1901 were 108,535 acres, 848,328 tons and 92,554 tons respectively. 

At the last half-yearly meeting of the Colonial Sugar Refining Company Limited the 
estimated Australian production of sugar was stated to be 452,000 tons, ‘‘of which about 
125,000 tons will have to be sold in other markets.” 

For details of the abolition of coloured labour, reference is made to Miss M. Willard’s 
History of the White Australia Policy, p. 136 onwards, and of the subsequent sugar industry 
in Queensland to Professor J. W. Gregory’s The Menace of Colour, (1925) pp. 216-24. 
The latter topic is referred to in Professor Ellsworth Huntington’s West of the Pacific, 


1925, D. 342. 
23 ] 


532 


wages and conditions prevailing until recently in Europe or North 
America, and are remarkable in a young country so new to industrial 
life. Maintenance of the high standard of living thus created would, 
it is conceived, be rendered precarious by the admission of any con 
siderable numbers of non-European aliens, and this, too, notwith- 
standing the natural desire of newcomers to share in Australian 
advantages. For organised labour in Australia has found its pa h 
smoothed by the homogeneity of the predominantly British stock 
which has greatly facilitated organisation. 

(2) To admit under condition of indenture a selected non-Euro-| 
pean stock, even of British nationality—e.g. British West Indian) 
negroes as the late Lord Leverhulme some years ago advocated for 
the development of the cotton industry in the Northern Territory: 4 
would but increase the political difficulty of defending the exclusion} 
of other non-European races under any conditions. And this quite 
apart from the objections to indentured labour, which from pre 
vious experience Australia holds to be decisive. 1 

(3) The drift to the towns would be not less among non-Europeans 
than among Europeans, and it is precisely in the towns that the 
economic and racial complications would be most severe and most 
resented. 

(4) It is well understood that the benefits of the White Australia 
Policy are purchased at a price which is to be measured not merely 
in the monetary cost of living, but in the inconveniences—not to 
say hardship—suffered through lack of domestic help by white, 
women in the country, and more particularly in Northern Queens- 
land. Yet for lack of experience of easier conditions, as in South 
Africa, this hardship is borne without complaint and is indeed pre- 
ferred to the perils of miscegenation which as a rule weigh heavily 
in the minds of European women. Nor indeed would it be fair to 
attribute lack of domestic help to immigration restrictions. Rather 
is it due to the high wages and a general distaste for domestic service 
noticed in all civilised countries since the war.” 

(5) Whatever be the merits of the original reasons for the policy, 
its maintenance is expedient now, since it keeps out not only impor- 
tant practical difficulties of administration, but also racial problems 
the gravity of which, in view of South African and American expe- 


29 The percentage of females in domestic and personal service in New South Wales was 
rather more than 8 per cent of the female population in 1901, and rather less than 6 per cent 


in 1921. 
[24] 


533 


jences, needs no demonstration. To Asiatic immigration Australian 
timent may be taken, then, to be irrevocably opposed. And even 
regards immigration from Europe at this early stage of Australian 
development, popular opinion in the Commonwealth undoubtedly 
avours a policy of selective immigration on the racial theory under- 
lying the United States’ Immigration Act of 1924. Popular prefer- 
ence for “‘Nordics’’ is no stronger in the United States than in 
Australia. On the more debatable question whether the adoption 
of this policy is expedient at the present stage, many Australians 
who know Professor Ellsworth Huntington’s work take confidence 
from his remarkable pronouncement in West of the Pacific in return- 
‘ing an affirmative answer. “ the best authorities,’’ he writes 
at page 387, “‘tell us that if we had had no immigration since the 
‘time when our population was only equal to that of Australia 
(6 million odd) our population today would only be in a moderate 
degree less numerous than is actually the case. It would be homo- 
/ geneous, and would have far more of the strong qualities which still 
‘enable the descendants of the Puritans to furnish an overwhelming 
proportion of our leaders.” 

To those who regard control of racial stock as the most important 
‘factor in the problem of nation-planning, Professor Huntington’s 
“counsel to keep the Australian stock undiluted is thoroughly wel- 
/ come, even though a policy based thereon may well depend for its 

success upon the very absence of that time-limit, which as Mr. 
_ Bruce,° among other prominent Australians, has not failed to re- 
mind his countrymen, conditions the Australian experiment. 


| POSITIVE ASPECT—PROMOTION OF WHITE SETTLEMENT 


If the White Australia Policy exhibits the essentially negative 
aspect of Australian immigration policy, it remains to explain the 
positive aspect. 

Under the Constitution Act the Federal Parliament is given the 
power to make laws concerning immigration, which was early exer- 
cised by imposing the restrictions on the immigration of the unde- 
sirable classes already referred to. Promotion of desirable immigra- 
tion was left to the States of which the first to display any activity 
in this connection was New South Wales in 1905. As the result of 


30 ¢, g. in speech at Sydney, April 13, 1927, referring to the Economic Conference con- 
vened by the League of Nations for session at Geneva in May, 1927. 


[25] 


534 


discussion at the Imperial Conference, 1907, it appeared that 
cooperation of the Imperial Government could not be extended be: 
yond supporting the emigrants’ Information Office in London, w 
the Commonwealth was not prepared to take control of the existing 
immigration machinery in England without the cooperation of al 
the Australian States, which could not then be secured. 

Meanwhile the States took steps of their own to encourage im 1 
grants for whom there was a special demand, but as regards suitabh e 
adults for settlement on the land, without great success. 

Generally speaking the States recruited their immigrants throug y 
agents employed by the shipping companies in return for a capitas 
tion fee in respect of approved applicants, and they made direct) 
contributions to the cost of fares of such applicants. Considerable! 
success attended private organisations for securing young immi- 
grants, é. g. of British boys between the ages of fourteen and eightee n 
under the Dreadnought Scheme, and of younger children selected | 
by the Child Immigration society of Oxford under Kingsley Fai 
bridge. 

In the period 1911-14 the total number of assisted immigrants was: | 


IQII 139,020 of whom 124,061 were British 
1912 163,990 °°) "> ro GGA a 
1913 140,251 “* 122 AAge Mh 
1914 TLO;7OL a. 03 .2Gnee e 
The net immigration (excess of arrivals over departures) to ad 


six States and two Territories (Northern Territory and Federal- 
Capital Territory) in 1911-14, was 190,446. 


“ac 


Cooperation with Imperial Government 


During the War immigration was practically suspended, and was. 
not resumed until 1920. In that year an arrangement was made 
between the Commonwealth and the State Governments that the 
Commonwealth should become responsible for the recruitment of 
immigrants required by the States and for their transport to Aus- 
tralia while the States undertook to advise the Commonwealth of 
the numbers and classes of immigrants they were prepared to re- 
ceive. In other words, the Commonwealth selected the immigrants 
according to the requirement of the States and brought them to Aus- 
tralia, and on their arrival the State Government assumed the res- 


[26 ] 


535 


asibility of placing them in employment or on the land. This divi- 
m of powers is one of the principal causes of difficulties to the 
)Australian authorities. Owing to the varying seasonal conditions 
‘the State requisitions fluctuate considerably from time to time with 
ad effects on recruiting and shipping arrangements 

_ In 1921 the Commonwealth took over all immigration machinery 
in Greaf Britain, abolished the system of capitation grants to agents 
and appointed a number of medical referees throughout Great Bri- 
/tain to examine applicants. 

| The system of assisted immigration was still further extended in 
}1921 by the cooperation of the British Government. 

Persons entitled to assisted passages fall into two classes (1) se- 
lected and (2) nominated immigrants. Selected immi- Nested 
grants are those such as farm workers and domestic = 
‘servants recruited by the Commonwealth on the initiative of a State 
Government. Nominated immigrants are those nominated by per- 
sons resident in Australia who undertake to be responsible for them 
on arrival so that they shall not become a burden on the State. 
The nominators submit their application for assisted passages 
through the State Immigration Offices in the various Capital Cities. 

Where assisted passages are granted, the effect is that children 
under twelve are carried free, juveniles between seventeen and nine- 
_teen years, who ordinarily rank as adult passengers paying full fare, 
“pay £5.10.0 each, married couples, including widowers and widows, 
and wives nominated by husbands, with at least one child over nine- 
| teen, pay £11 per parent (children at rate according to age); others 
| including children nineteen years and over £16.10.0 each. These 
ij rates are the result of contributions made jointly by the Common- 
_ wealth and British Governments under agreement after-mentioned, 
- and are valid until March 31, 1928. At the Imperial Conference in 
1926 it was agreed to recommend that women accepted as domestic 

servants should be carried free and this scheme is now in operation. 

In 1921 in furtherance of post-war emigration schemes, the British 

Government summoned an Imperial Conference on emigration, 

which recommended financial cooperation between the British and 

Dominion Governments in a comprehensive policy of redistributing 

population particularly in connection with land settlement schemes. 

These recommendations were accepted by the Imperial Conference 

in the following June-August and the British Government passed 


[27 ] 


536 


an Empire Settlement Act in 1922 which empowered it to cooperat 
with any Dominion in any scheme mutually agreed on. The con 
tribution of the British Government, which was in no case to e 
ceed half the expenses of any such arrangement, was limited ¢ 
£1,500,000 for the first year and £3,000,000 for each subsequent 
year, exclusive of any sums received as repayment of advances} 
Immediately after the Act was passed, an agreement was made 
between the British and the Commonwealth Governments whereby 
one-third of the cost of passage of an approved settler was to be cons 
tributed by the two Governments jointly, and advances coverir ig 


cumstances. It is under this Agreement that the rates above quoted d| 
have been fixed. | 

The only large scheme undertaken by an Australian State with 
assistance provided under this Agreement was a group settlement 
scheme in Western Australia. This State undertook to place 6000) 
settlers with their families on farms of their own at an estimated cost| 
of £6,000,000 excluding passages: the Commonwealth Government! 
was to raise the necessary loans and the British Government agreed 1 
to contribute a sum equivalent to one-third of the interest on the 
loan for a period of five years. 1352 settlers were introduced under 
this scheme and accommodated in the heavily timbered south- 
western district. The scheme was prosecuted for two years but with 
disappointing results. According to a Royal Commission, which 
reported on the undertaking, the farms which the State undertook 
to provide for £1000 were costing between £1400 and £1500, a sum 
considerably in excess of their market value; the British settlers 
were inexperienced and had not been tested in agricultural work 
before selection. The relative failure seems to have been due to 
errors of administration. Recruiting for the West Australian scheme 
is being carried on to a limited extent only. 

In view of the land hunger of Australian citizens, none of the other 
Governments availed themselves on a large scale of the resources 
made available by the British Government. 

In 1925 a new Agreement was accordingly made, whereby loan 
money will be made available to the Governments of various States 
at very low rates of interest, to be used for settlement or for such 
public works as will tend to develop settlement areas or increase 
their population carrying capacity. 


[28] 


537 


_The maximum amount of loan money is £34,000,000 spread over 
a period of ten years. Fifty per cent of the funds may be used for 
he settlement of Australians on the land, but for every £75 received 
by a State Government under the Agreement at least one assisted 
migrant shall sail direct from the United Kingdom and be settled 
‘n Australia not necessarily on the land. Of every 10,000 assisted 
migrants, 3,750 may be persons without any capital. Effective 
‘Australian cooperation in this scheme involves the raising of an 
additional pound for pound since £30,000,000 of this loan money 
as spent in 1926. 

Western Australia (which is again taking families for closer settle- 


> 


abour Government being first to attack the problem of ‘‘bursting”’ 
the large estates by imposing a graduated tax on those areas in large 
estates near railways which are suitable but not devoted to agricul- 
ture. This for the purpose of making land available for closer settle- 
ment. A Government Bill* with this purpose was introduced in 
February 1927. 

_ The Commonwealth Statistician points out that if full advantage 
is taken of these loan moneys, 450,000 new settlers must be absorbed 
over a period of ten years; 45,000 per annum is slightly less than the 
total number of assisted passages in the best pre-war year, 1912, 
Viz.: 46,712. 

Commonwealth Legislation 1926 


In accordance with this Imperial scheme, the Commonwealth 
Government last year passed an important Development Development 
> . : : “ie and Migration 

and Migration Act® constituting a Commission of four Act 
members charged with the duty of stimulating the development 
of Australian resources as a preliminary to attracting increased num- 
bers of immigrants. The Commission is to organise a body of Scien- 
tists who will proceed with a survey of the resources of what the 
Prime Minister in introducing the measure described as “‘ the greatest 
undeveloped country in the world.””’ The Commission will then form- 
ulate plans for “utilising our resources and the most effective and 
rapid method of dealing with them.” It will act as a clearinghouse 
in respect of Australian needs for labour and the possibilities for 


3 The Large Estates (Taxation Management) Bill, 1927. 
® No. 29 of 1926. 
[ 29 ] 


538 


absorbing overseas capital. It will advise the Minister for Marke 
on the outlets for Australian produce and will cooperate with tk 
States in all their developmental works. The Commission will al 
take charge of the London Migration Office of the Commonwealtl 
For funds the Commission will depend upon the Treasurer. Th 
Commonwealth Government undertakes not to approve of an 
scheme not recommended by the Commission, but power is reserve 
to Parliament to give its assent to any matter whether approved by 
the Commission or not.’ The scope of the Commission’s activitie 
was outlined in a Memorandum presented to the Imperial Confer 
ence, 1926, by Mr. Gepp, the Chairman, who laid stress on ab 
sorptive capacity as the dominating factor in the problem of popula 
ing Australia. 

In answer to a question in the House of Representatives on Mare 
3, 1927, the Prime Minister gave an account of the activities of th 
Commission since October last. These included investigations and 
recommendations which had been adopted by the Government ii 
regard to a number of schemes approved under the £34,000,000 
Agreement, involving an expenditure of over £6,000,000. Furthe 
schemes submitted by the States and amounting to £10,000,000 
are under investigation. Jn addition, the Commission has hac 
referred to it and is giving attention to the following questions: 


(a) Unemployment survey including the problem of seasonal — 
variations. 

(b) The present position and future possibilities of Tasmania* 
on the economic side, in consultation with the State Govern- 
ment and the Council for Scientific and Industrial research. 

(c) The dried fruits industry throughout Australia. 

(d) The gold mining industry of Australia with particular re- 
ference to Kalgoorlie (Western Australia) and 

(e) The economic utilisation of Australian oil shale deposits. 


Consideration is also being given to certain phases of the wool and 
wheat industries, and to the meat and dairying industries and their 
attendant problems of breeding, animal nutrition and improved 
pasturage.* 


33 The Commission consists of Mr. H. W. Gepp (formerly General Manager of the Elec- 
trolytic Zinc Company of Australia) Chairman; Mr. C. S. Nathan (Chairman of Directors 
of Messrs. Atkins Ltd., Perth, W. A.); Mr. j. Gunn (lately Labour Premier of South 
Australia), and Mr. E. P.F leming (formerly Under Secretary for Lands, New South Wales). 

34 See Appendices to Summary of Proceedings, pp. 287-90 (1927), Cmd. 2769. 

35 For present position of Tasmania, see The Round Table, June, 1927. 

% See Commonwealth Parl. Debates, 1st Sess., 2d Period, 1927, No. 1, p. 58. 


[ 30 ] 


539 


It should be added that on his return to Australia in February 
ast Mr. Bruce announced (perhaps prematurely) that he had per- 
uaded the British Government to send to Australia two or three of 
e best business and financial men in Great Britain to enquire into 
rade development and the question whether Australia could absorb 
more migrants, the work of these experts to be supplemented to that 
bf the Australian Development and Migration Commission. At the 
time of writing their names have not been announced but it is under- 
stood that their main concern will be with the possibilities of family 
settlements (which have proved successful in Canada) and with the 
extremely costly matter of rural housing, for which large amounts of 
loan money would be required. 
On the general problem of land settlement in Australia, the best 
summaries of local opinion are to be found in Australian chronicle 
articles appearing in The Round Table, on the basis of which the 
‘following brief statement may be given.” 
For settlers from the United Kingdom whom it is desirable to 
/encourage to settle on the land, the primary products which offer 
most prospect are wool, wheat, meat, cotton, fruit, and dairy prod- 
ucts. With the necessary capital production of all these is relatively 
leasy, but owing to the small home-population successful production 
is conditioned by the problem of marketing. Share-farming offers 
ithe immigrant with small capital a means of acquiring local experi- 
'ence and of making savings. 
Pure-bred merino wool and indeed wool of other kinds, in the 
| production of which Australia excels owing to her advantages of 
/climate and natural grasses, presents no difficulties of marketing. 
Australian wheat, especially the hard varieties, sells easily abroad. 
Meat presents a much more difficult problem. For mutton and lamb 
profitable markets exist in the European market, but for meat, which 
can be produced on a large scale in Australia, distance from European 
“markets proves one of several handicaps in competition with Argen- 
tine and other growers. 

For Australian cotton of good quality the prospects appear bright. 
Dairy products are mainly sold locally, with a considerable export 
trade. Sugar and fruit present the greatest difficulties. With the 
protection of a high tariff, reinforced at present by the embargo upon 
sugar grown by black labour, the sugar industry is carried on in 


37 cf. Round Table, 1923, No. 53, p. 153 et seq. 


[egos 


540 


Queensland by white labour at the cost of the Australian consume 
throughout the continent. 

It is in regard to dried and canned fruit that the marketing problen 
is most acute and likely to become worse as more of the orchard 
worked by small farmers and returned soldiers on irrigation area 4 
in Mildura and Renmark on the river Murray—come into bearing 
It is estimated that in 1927, 80 per cent of the dried fruit product wi 
be available for export as compared with 1914. Even with 
assistance of marketing pools, the export trade has not proved 
profitable. ‘ 

Immigration on any but a small scale is further conditioned by thg 
provision for land settlement. As the best lands are already alienated 
and the Crown lands comprise almost the whole of the useless third 
of Australia, “‘the problem of land settlement is in the main ong 
of a subdivision and re-settlement.’’ Subdivision, moreover, is 
costly. The State in compensating owners for their land pays cashy 
and must act as land-agent in finding purchasers on long credit terms 
for the subdivided holdings. The burden on State or immigran 
or both may well be heavy and long. 

A further practical difficulty—already alluded to—is caused by t 
division of powers between the Commonwealth and the State, the 
Commonwealth controlling immigration and the States the land. 

In view of these considerations which indicate that the absorptiv 
capacity of the State as regards land settlement cannot be rapidly 
increased the Over-sea Settlement Sub-committee of the Imperial 
Conference recommended enquiries as to the possible opening for 
British immigrants in industry and in other directions.* This 
topic, with attendant enquiries into state and causes of unemploy- 
ment, has accordingly been included in the programme of the Austra- 
lian Development and Migration Commission mentioned above. 

The following figures showing the outward movement of British 
migrants to Australia in 1925-26 are taken from the Sub-Com- 
mittee’s Report: ; 


%3 Imperial Conference, 1926. Appendices etc., 1927, Cmd. 2760, p. 281. 
39 Op. cit., p. 286. 


[32.4 


541 


' To Australia— 


| Outward movement Assisted under Percentage of Total Assisted under 
of British migrants Empire Settlement | outward movement Empire Settle- 
| for six months ending Act 1922 for six assisted under the ment Act 1922 


June 30, 1925 and months ending Act for nine months 
|| 1926 (Board of Trade | June 30, 1925 and ending Sept. 30, 
i Return) 1926 1925 and 1926 


1925 1926 1925 1926 1925 1926 1925 1926 


"17,979 21,630 | 11,987 | 16,422 67 76 17,621 | 25,362 


The Northern Territory, which was taken over by the Common- 
/ wealth from South Australia in 1911, has always pre- Northern 
‘sented a problem of difficulty. Variously regarded, as Ter 


| a recent writer*® says, as ‘‘a White Elephant, an Untamed Act, 1926 


At long last, however, the Territory is receiving adequate atten- 
tion from the Federal Government, which early in 1926 obtained 
, statutory powers“ to construct, at a cost not exceeding £1,700,000, 
| the first section of the North-South Railway, which will eventually 
/ connect Darwin with the East-West system in the south. Later in 
the year was passed the Northern Australia Act (No. 16 of 1926) 
by which provision is made for remedying the admittedly faulty 
administration of the Territory. The Act divides the Territory 
into two parts. North of the twentieth parallel is to be known in 
future as North Australia, and south of that line as Central Australia. 
A Government Resident is to be appointed for each part (with head- 
quarters respectively at Newcastle Waters and at Alice Springs), 
assisted by an Advisory Council, two members of which are to be 
elected and two appointed by the Federal Government. The resi- 
dent will be responsible for such of the services as are not adminis- 
tered from Melbourne or entrusted by the Act to the North Austra- 
lian Commission. This Commission, which is to consist of three 
members appointed for five years and such additional terms of five 
years as may be determined, has mainly developmental duties, e. g. 
to maintain and operate railways, construct and maintain roads, 

40In the valuable article by G. L. Wood on the ‘‘Settlement of Northern Australia’ 
in The Economic Record, Vol. 2, p. 1. (Macmillan Company Ltd., Melbourne, 1926.) 

41 Oondatta to Alice Springs Railway Act, No. 3 of 1926. 


ey | 


542 


telegraphs, ports, and harbours, and, to carry on water boring a 
water conservation. Moreover, it is to prepare for the Minister | 
Home and Territories a complete scheme for the developmen 
of Northern Australia. The Act, however, is merely administrativ 
machinery, the initiative and responsibility for expenditure 
public works resting with the Minister and the Federal Treasure: 
subject to the approval of Parliament. With the same object o 
obtaining expert advice, which may be helpful to the Territory a 
well as to Australia as a whole, the Federal Government recen 
employed Sir George Buchanan, a well-known engineering expert 
to report upon the ports and harbours of Australia. His Repo 
was first published in summary form and recently appeared in t 
volumes. 


APPENDICES 
Appendix A 


The following particulars are given in view of an error which has crept 
into International Conciliation, No. 218 (March, 1926), p. 14, where it is 
stated that “‘the examination may be given in Latin, Greek, or Sanscrit 
5 ”” Mr. Merle Davis, the author of the paper in question, tells me 
that this passage was based on a statement in an address read by an 
Australian delegate at the Honolulu Conference of the Institute of Pacific 
Relations in July, 1925, which ran: 


for instance in two well-known cases (1906-1915) undesirable Ger- 

mans were excluded by a test of fifty words in classical Greek, and 

it is conceivable that a person might be given a test either in the 
most technical botanical jargon or in Amaric. (See Proceedings, 

p. 62.) 

In the absence of the names of the Germans referred to, it has proved 
impossible to trace these cases in the records of the Ministry of Home and 
Territories. Nor is there any record that classical Greek has ever been 
used for the purpose of the dictation test. Moreover the officer in charge 
of the administration of the Act in 1906, of whom enquiry has been made, - 
states that he would not have sanctioned the use of this language, had it 
been suggested. As regards the case in I915, it is pointed out that a 
German national would have been excluded as an enemy alien under the 
War Precautions Act 1914, without recourse to a dictation test under the 
Immigration Act. 

The second sentence in the passage quoted is, as an interpretation of 
Sec. 3 of the Statute, doubtless correct, but as stated above, a European 
language means in Australian official practice concerning immigration 
a living European language and not a dead one. 


[34] 


543 


_ Both of the sentences quoted must, it is conceived, have been written 
der a misapprehension. 

The method of applying the dictation test is as follows: 

The Minister of Home and Territories, who is charged with the ad- 
‘ministration of the Immigration Act, selects, and causes to be Method of 
printed, a passage of fifty words in the English language, Applying Dic- 
which is issued in printed slips specifying the period during Lo 
which it is valid for use by the Customs Officers, who are authorised 
to administer the dictation test on the Minister’s behalf. The following 
is a specimen passage: 


From 8th to 15th June, 1926. No ’26/ 11. 


Wines are made by crushing the grapes and letting the juice fer- 
ment. The skins of the fruit may be fermented in the juice, thus 
making red wines that take their colour from the pigment under 
the skin. Juice alone is used in making white wines. The sugar 
in grapes produces alcohol. 


These passages are changed every fortnight. 

In the case of passengers arriving by sea it is the practice to apply 
the test on board the ship after she has reached the quarantine boarding 
station, but before the passengers have landed, so that in an appropriate 
case the shipmaster may be informed of the presence on board of a pro- 
hibited immigrant, whom he must not allow to land. 

The test may also be applied on land since the Act provides that it 
may be applied in the case of all immigrants at any time within three 
years after entry (S. 5 (2)) and in the case of immigrants who have entered 
in evasion or violation of the Act at any time after entry. In these cases, 
at any rate, if the immigrant passes the test in one language he seems 
to be liable under the words ‘‘at any time’’ to be tested again in another. 

Before the test is applied the immigrant is informed in his own language 
by the officer that the dictation test is about to be administered to him, 
and the language of the selected passage is named. Where necessary 
an interpreter is used for making this communication. The officer then 
in the presence of the immigrant, reads out for the first time the selected 
passage slowly and clearly, and thereafter furnishes the immigrant with 
table, writing materials, and chair, and reads out the passage at a pace 
suitable for dictation. 

If the immigrant fails to write out and sign in the presence of the officer 
the passage dictated, he is informed by the officer that he is a prohibited 
immigrant, and will not be permitted to land. 

Where the language selected for the dictation test is a European lan- 
guage other than English, it is a translation into the foreign language of 
the English passage on the current official slip that is used in the test, 


[35] 


544 


but except in such cases the language used in the test is not mentioned in 
the Officer’s report. : | 

That the dictation test operates as a “‘stand-off signal” is shown by thel 
small number of persons who are excluded in virtue of it. For the year 
ending December 31, 1926, 36 persons were so excluded, comprising 4| 
British subjects, 22 Chinese, 7 Papuans, and 1 Hawaiian. | 

The meaning of “immigration”’ and “immigrant,’”’ as well as various 
Judicial Inter- POints regarding the dictation test, have been discussed in| 
pretation of | the High Court of Australia in various cases. In the earlier 

Immigration q a = . . 

and“‘Immi- cases the Court inclined to the view that ‘immigratio 
grant meant coming into the Commonwealth (cf. Chia Gee v. Martin, 
(1905), 2 Commonwealth Law Reports at 654), and that any person whe 
sought to enter the Commonwealth from abroad was prima facie an i 
migrant (cf. Ah Yin v. Christie (1907), 4 C. L. R. at 1432), though thel 
Act was probably not to be read as extending to the case of an ‘‘ Aus-| 
tralian’’ returning from a visit abroad (cf. Ait. Gen. for the Common- 
wealth v. Ah Sheung (1906), 4 C. L. R. at 951). 


‘ 


tionality (cf. Gibson & Co. v. Gibson (1913), 3 K. B. 379) and a mere Aus- 
tralian domicile is insufficient. The mere fact, for instance, that ail 
infant who was not born in Australia and had never been in Australia, had 
acquired a legal domicile of origin in Australia by reason of his father’s 
domicile here was held to be irrelevant in Ah Vin’s Case (supra). 

The question was more fully discussed in Potter v. Minahan (1908), 
7 C. L. R. 277, where the Court held that— | 


I. immigration does not mean mere physical entry into the Com- 
monwealth, though the fact of entry is, if no more appears, suf- 
ficient prima facie evidence that the person entering is an immi- 
grant (zbid 286); 

2. the question whether a person is an immigrant is not to be deter- 
mined by the mere application of the rule either of nationality 
or domicile; 

3. a person is not an immigrant, if he is returning to an Australian 
home (ibid 290) in the sense that he is to be regarded as being 
already a member of the Australian community; 

4. The proper test appears to be that given by Isaacs J. (ibid 390), 
i. e. whether the whole of the facts show that at the moment of 
entry the person is fairly to be considered as one of the people of 
the Commonwealth and whether, notwithstanding any person- 
al absence from Australia, he can justly and in substance claim 
to regard this country as a place of habitation or general residence 
which he has never abandoned. 


See also Ling Pack v. Gleeson (1913), 15 C. L. R. 725. 
[ 36 ] 


545 


As to the dictation test, the Court held in Chia Gee’s Case (supra) 
that it is for the officer and not the immigrant to select the European 
anguage. 

In a recent case turning on a provision contained in Sec. 8aa of the 
Immigration Act 1901-25, the Court held, by a majority, that the immigra- 
tion power conferred by the Constitution does not authorise the Parlia- 
ent to legislate with respect to persons, who, having immigrated to 
ustralia, have made their permanent homes there and so have become 
‘members of the Australian community; and, by two judges, that Sec. 
'8aa upon its proper construction does not apply to such persons. (ex 
parte Walsh and Johnson; in re Yates (1925), 38 C. L. R. 36). Of the in- 
‘dividuals in question, Walsh, born in Ireland in 1871, had become resident 
‘and domiciled in New South Wales in 1893, since when he had never had 
‘a home outside Australia; while Johnson, born in Holland in 1885, had 
‘come to reside in New South Wales in 1910, becoming naturalised in 1913. 
‘His permanent home had been in that State since 1910. 


Appendix B 
| As the result of discussions at the Imperial Conference of 1921 and 
| 1923, the Federal Government has removed certain legal 7.94) pisabili- 
| disabilities affecting British Indians domiciled in Australia _ties of British 

i ; ; Indians Domi- 
| which had been complained of as being founded on race or  ciled in Aus- 
‘colour. The Conference of 1921 adopted a Resolution recog- oa 
| nising “that there is an incongruity between the position of India as 
/an equal member of the British Empire and the existence of disabili- 
‘ties upon Indians lawfully domiciled in some parts of the Empire (e. g. 
| South Africa and Australia where Indians were excluded from the Federal 
| franchise as falling within the class of ‘aboriginal natives . . . of Asia’) 
and recommending that the rights of such Indians to citizenship should be 
| recognized,” 

Mr. Sastri, a distinguished Indian gentleman, visited the Common- 
wealth in 1922 on behalf of the Indian Government, but notwithstanding 
the powerful impression which he made upon members of the govern- 
ment, they did not deem it opportune to introduce legislation with the 
desired object. At the Imperial Conference of 1923 the subject was re- 
opened by the Secretary of State for India, who adverted to the intensity 
of feeling aroused in India by this question, which was due to the opinion 
(unshared by himself) that the disabilities of Indians were based on dis- 
tinctions of colour and were badges of racial inferiority. Ata later stage 
the Indian delegation proposed that the Dominion Governments concerned 
and the British Governments for Colonies and Protectorates should agree 


to the appointment of committees to confer with a committee appointed 


[37] 


546 


by the Indian Government as to the best and quickest means of givis 
effect to the Resolution of 1921. The Prime Ministers of South Afric 
Canada, and Australia disclaimed colour distinction. The first w 
comed, the second and third doubted the need of, the proposed committe 
All promised full consultation with the Indian Government. The Austr 
lian Prime Minister gave an assurance that he would consult his colleag 
regarding the action to be taken on the Resolution of 1921. New Zeala 
welcomed the proposal, there being, in fact, no discrimination betweet 
Indians and Anglo-Saxons settled there. | 
The discussion, which may have served to dispel the Indian belief the t 
any existing disabilities of Indians in the Empire were based on race of| 
colour, has led at last in Australia to the removal of the most important 
of them. Thus “natives of British India’’ are made eligible, if otherwise] 
qualified, for the Federal franchise, in virtue of the Commonwealth Electoral} 
Act 1918-1925, Sec. 2; ‘‘Indians born in British India” are no longer ex-| 
cluded from the benefits of the Invalid and Old Age Pension Act 1908-25, | 
this by virtue of Act No. 44 of 1926, while by virtue of Sec. 2 of the Ma-} 
ternity Allowance Act 1912-26, wives of British subjects, being by birth 
Asiatics, are no longer excluded from the benefits of the principal Act, | 


[ 38 ] 


LIST OF PUBLICATIONS 


International Conciliation appeared under the imprint of the American 
Association for Se eden Conciliation, No. 1, April, 1907 to No. 199, June, 
3924. These documents present the views of distinguished leaders of opinion 
of many countries on vital international problems and reproduce the texts 
‘of official treaties, diplomatic correspondence and draft plans for interna- 
tional projects such as the Permanent Court of International Justice. The 
most recent publications are listed below. A complete list will be sent upon 
application to International Conciliation, 405 West 117th Street, New York 
City. 

219. The Fourth Year of the Permanent Court of International Justice, by 
Manley O. Hudson, Bemis Professor of International Law, Harvard 
Law School. 
April, 1926. 3 
220. Disarmament and American Foreign Policy. Articles by James T. 
Shotwell, Tasker H. Bliss, David Hunter Miller and Joseph P. Cham- 
berlain. 
May, 1926. 
221. Treaty-Making Power under the Constitution of Japan, by Tsunejiro 
Miyaoka, of the Bar of Japan. 
June, 1926. 
222. The Problem of Minorities. Articles by Louis Eisenmann, William E. 
Rappard, H. Wilson Harris and Raymond Leslie Buell. 
September, 1926. 
293. The Political Doctrine of Fascism, by Alfredo Rocco, Minister of Justice 
in the Government of Italy. Recent Legislation in Italy. 
October, 1926. 
224. An Alternative Use of Force: When the Earth Trembled, by Richard 
J. Walsh; The Moral Equivalent of War, by William James. 
November, "1926. 
225. Observations in Egypt, Palestine, and Greece. A Report, by Henry S. 
Pritchett, Trustee of the Carnegie Endowment for International Peace. 


December, 1926. 

226. Raw Materials and Their Effect upon International Relations. Articles 
by George Otis Smith, L. L. Summers, E. Dana Durand, Parker T. 
Moon, and Edward Mead Earle. 

<7. 1927. ‘ 

227. Chinese Politics and Foreign Powers, by Harold S. Quigley. Syllabus on 

Recent Chinese Politics and Diplomacy. 
February, 1927. 

228. The British Commonwealth of Nations: Report of Inter-Imperial Rela- 
tions Committee; Address by The Rt. Hon. Stanley Melbourne Bruce, 
Prime — of Australia. 

March, 1 
229. wegsteno. pat the Balkans: A Turning Point in History, by James T. 
—— The Possibility of a Balkan Locarno, by David Mitrany. 
pril, 192 

230. The interallied Debts. Statements as to the Desirability of an Early 

Revision of Existing Arrangements. 
May, 1927. 

231. The League of Nations: The League of Nations as an Historical Fact, 

by William E. Rappard; The Admission of Germany to the League of 
I Nations and Its Probable Significance, by Caleb Perry Patterson. 
une, 1927. 

232. The Permanent Court of International Justice: The United States and 
the Permanent Court of International Justice, by Quincy Wright; 
Sidelights on the Permanent Court of International Justice, by Ake 
Hammarskjold. 

September, 1927. 

233- The Genesis of the Universal Postal Union. A Study in the Beginnings 

of International Organization, by John F. Sly. 
October, 1927. 

234. Italy’s Financial Policy, as outlined by Count Giuseppe Volpi of Misurata, 
Minister of Finance in the Government of Italy. Text of the Italian 
Labor Charter. 

November, 1927. 

235. Australian Immigration Policy, by A. H. Charteris, Challis Professor of 

“oy ie Law, University of Sydney, New South Wales. 
» 1927. 


whi 


i 


I 


